"Stocks are fairly priced relative to today's super-low interest rates," observes Overpriced Stock Service (P.O. Box 308, Half Moon Bay, Calif. 94019). "However, today's low rates are unlikely to last, as recent Fed tightening suggests. Only a few diehard value investors remain outside the party. Everybody else is invested. Will all these people be smart enough to sell in time to avoid the carnage? Yeah, right. Rising interest rates and the ensuing rush to cash won't be a pretty sight."
- By combining high-quality growth stocks with lesser-quality value issues, and by sticking with the more predictable large-cap companies, Nationwide Growth Fund outperformed the average "blend" fund by 4 percentage points in 1993. Its 17.2 percent average annual return over the past three years exceeds the S&P 500 return by 1.6 points. Recent favorite stocks: Grand Metropolitan, Consolidated Stores, Bear Stearns, Hanson, AT&T, Hewlett Packard, Automatic Data Processing.- As the economy strengthens, loan demand increases, which is good for bank stocks. And modest interest rate increases allow banks to raise the rates they charge for loans faster than they raise depositor rates to attract capital. Financial World magazine (P.O. Box 420-142, Palm Coast, Fla. 32142-9554; 800-829-5916) recently listed 11 bank stocks with substantial excess reserves that could boost their income: Provident Bankshares, First American, Union Planters, First Bank System, Mobile National, People's Bank, Norwest, Deposit Guaranty, First Tennessee National, Mellon Bank, Trustmark.
- Buying when things look bleakest is the wisest investment strategy, if the scariest, says R.S. Salomon of Salomon Brothers Asset Management. "Most European economies are one to two years behind the U.S. cycle. But with a fundamental turnaround likely in six to 12 months, Europe's stocks look cheap." Salomon's favorite undervalued European issues: Dresdner (Germany, banks), L.M. Ericsson (Sweden, telecom equipment), Repsol (Spain, energy), Aegon (Netherlands, insurance), Hanson (United Kingdom, conglomerate), Cable & Wireless (United Kingdom, telecomm).
- Bond investors shouldn't buy securities that mature in one year, advises The Wall Street Journal (800-221-1940). "Many big investors, such as money market funds, aren't allowed to buy securities with maturities longer than that, so there's a huge demand for one-year paper, which drives down yields. Since 1980, returns on one-year paper have been about 0.5 percent lower than those on longer-term securities of comparable risk. You're better off with a mix of six-month and two-year paper."
- Kiplinger's Personal Finance Magazine (1729 H St. N.W., Washington, D.C. 20006) recently constructed a mutual fund portfolio for income-oriented retirees seeking some growth as protection from inflation and willing to tolerate some volatility. It contains no-load funds with low initial minimum investment requirements; blends growth and value styles, large-cap and small-cap stocks; and contains bond and foreign components. The seven funds: Benham GNMA, Financial Industrial Income, Fidelity Asset Manager, Harbor Bond, Stratton Monthly Dividend, Strong Short-Term Bond, USAA Income Stock.
- Speaking of retirement, the American Association of Retired Persons (AARP) Investment Program from Scudder is now offering a free "Planning for Retirement" guide designed for individuals aged 50 or older. It's one of the most comprehensive and easy-to-use publications on the subject we've ever seen, and is available by calling 800-322-2282, extension 6286.