New York investment banker Shelby Cullom Davis, who's been on Wall Street for 50 years, thinks there are four reasons why the Dow can reach 5,000 this decade despite the recent downturn spurred by the Middle East crisis. "First, I have never known of so many stock buybacks. Second, there's more restructuring than I've ever seen. Third, takeovers are being done by entrepreneurs, and that's healthy. Lastly, prices compared with a few years ago are still cheap. Value Line's 170 stocks are selling at only 13 times earnings."
- Investors buy utility stocks for income. Yet according to Utility Analyst (P.O. Box 15381, Chevy Chase, Md. 20825), "some utilities provide both high cash return and consistent growth." To find the best of this breed, U.A. recently compiled two separate 18-utility lists: one of companies with 10-year dividend growth of 100 percent-plus, another of companies with four-year compound average dividend growth of 8 percent-plus. Six utilities with double-digit, four-year dividend growth made both lists: Atlanta Gas Light, Black Hills, Con Ed N.Y., Consolidated Natural Gas, Utilicorp and Valley Resources.- Many people believe the recent success of foreign stocks is a short-term phenomenon. But according to a recent study by Ibbotson Associates, it's been going on quietly for decades. In the past five years, foreign stocks gained an average 36 percent annually, vs. 15.4 percent for large U.S. stocks and 6.7 percent for small U.S. stocks. Over the past 20 years, foreign equities have also dominated, rising 15.8 percent annually vs. 11.5 percent for small U.S. stocks and 9.5 percent of large U.S. stocks.
- Kenneth Urbaszewski, who managed the most successful junk bond portfolio of the '80s, Kemper High Yield Fund, has two tips for investors tempted to do some bottom-fishing in junk. "Concentrate on how much excess cash flow the business can generate to make interest payments and retire debt. And estimate how much the company's revenues could fall in a recession. I look at balance sheets and adjust the figures to include the true value of assets and liabilities. Often there are hidden assets not reflected in the numbers."
- An alternative for investors who don't live in states offering the new zero-coupon bonds for college savings is the trusty old Series EE U.S. savings bond, says Personal Finance (1101 King St., Suite 400, Alexandria, Va. 22314). "Starting in 1990, couples with up to $60,000 of adjusted gross income annually can redeem savings bonds to pay college expenses without incurring any income tax on the accrued interest."
- The fundamental supply/demand situation for silver remains bleak, says Personal Investing News (82 Wall St., Suite 1165, New York, N.Y. 10005). "Since 1980, consumption has been lower than production. Secondary or recycled silver added about 150 million ounces to the 430 million mined worldwide last year. And both Echo Bay Mines and Placer Dome expect to produce 30 million more ounces of silver in 1991 than in 1989 as more gold properties come into full production. This will add about 7 percent to the supply."
- To determine the service quality of America's mutual funds, Financial World magazine surveyed 9,000 of its fund-owning subscribers. Sixty-one different fund families were rated, with an index composed of "best service" responses divided by "worst service" responses. The four clear service-favorite families, in order: Strong, Vanguard, Penn Square and T. Rowe Price.
Investor's Notebook reflects the opinions of professionals. It does not endorse specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited. 1990 Universal Press Syndicate 4900 Main St., Kansas City, MO 64112.