"The stock market's classic reaction is to confound the majority," observes Fund Profit Alert newsletter (P.O. Box 46709, Cincinnati, OH 45246). "And the majority is simply far too pessimistic for a top to occur now. Short interest remains at astronomical levels. This indicates an ongoing effort to call a top in this market. But such tops rarely, if ever, occur when so widely anticipated. Stay fully invested."
- Most value-oriented small-cap mutual funds buy staid, inexpensive stocks. Not FPA Capital Fund. It's not afraid of volatile issues, nor is it reluctant to pay high prices for them, as long as those high prices come accompanied by expanding earnings. This willingness to make contrarian bets on out-of-favor growth stocks has helped FPA Capital appreciate an average 18.9 percent annually over the past five years. Recent favorites: Greenwich Financial, Puritan-Bennett, Quick & Reilly, Fleetwood Enterprises, NIKE, Anthem Electronics, Comdisco.- The U.S. steel industry has piqued the interests of the Swiss contrarians at The Zurich Financial (Rennweg 32, CH-8001, Zurich, Switzerland). "We expect a turnaround in this sector. Earnings estimates are rising steadily and industry fundamentals are improving. Inland Steel is our conservative pick. We expect its earnings to really turn around in 1994. Armco is our speculative pick. From around $0.10 a share this year it could earn $0.77 next."
- Profitable stocks often share common attributes, observes Junior Growth Stocks newsletter (P.O. Box 15381, Chevy Chase, MD 20825). "One we've found especially significant over the years is an ability to pass our 20-20-20 test. That's an annual growth in sales and earnings over 20 percent, return on equity over 20 percent, and debt-to-equity ratio less than 20 percent." Ten stocks that recently made the grade: American Power Conversion, Biomet, BMC Software, Buffets, Cisco Systems, Electronic Arts, Fastenal, Jones Apparel, Linear Technology, Microsoft.
- "Germany's economy is in a free-fall, exacerbated by its anti-inflation, tight-money fetish that strangles commerce," observes Kenneth Fisher, writing in Forbes. "Germany must eventually loosen credit, allowing other European countries to do what they've long wanted to do - lower their own interest rates. Prices of European bonds will rise in response, inevitably so."
- You can assemble a diversified mix of U.S. stocks using as few as four no-load mutual funds that encompass the four major stock categories, says Kiplinger's Personal Finance Magazine (1729 H St. N.W., Washington, DC 20006). "For large-company value stocks, there's Neuberger & Berman Guardian Fund or Dreman High Return. For large-company growth stocks there's Janus Fund or Gabelli Growth. For small-company value stocks there's Royce Premier. For small-company growth stocks there's Berger 100."
- It's tough for active stock market traders to beat the market after brokerage commissions and bid/ask spreads are deducted, notes The Hulbert Financial Digest (316 Commerce St., Alexandria, VA 22314). "For example, of the 10 market-timing letters for which a decade of performance is available, only one, Market Logic, beat the 17.1 percent average annual gain a buy-and-hold strategy would have produced, and none beat the 13.5 percent such a strategy would have produced after taxes. After taxes, Market Logic's 17.7 percent return fell to 12.9 percent."