Value Line's analysts regularly predict how much the stocks they follow will appreciate over the next three to five years, reports The Hul-bert Financial Digest (316 Commerce St., Alexandria, VA 22314). "The median of these projections has proved to be highly correlated with the market's level four years later. It recently was suggesting that the market will be only 10 percent higher in four years. Even including dividends, this suggests a pathetic 5 percent annual return for stocks."
- Legg Mason Special Investment Trust (800-822-5544), whose holdings have appreciated an average 13.7 percent annually over the past five years, mixes value and growth criteria when selecting its stocks. It likes to buy companies that have had short-term reversals yet balance this misfortune with good management, strong cash flow, low prices compared with their potential and one or more promising investment catalysts. Recent favorites: Home Shopping Network, Circus Circus, Diagnostek, Safecard Services, Pioneer Group, United Asset Management.- While the auto-parts manufacturers were trying to get into Japan, the auto-parts retailers were conquering America. According to Kemper Securities (800-621-1148), the five publicly traded auto-parts retailers are accelerating their expansion rate from a healthy 14 percent annually over the past five years to a whopping 18 percent over the next five. This will double the current number of stores. Kemper's favorite auto-parts retailer stocks: Pep Boys, O'Reilly Automotive, Hi-Lo Automotive.
- The Legacy Portfolio of Profitable Investing newsletter (7811 Montrose Road, Potomac, MD 20854) consists of six stocks that can be bought directly from their companies at little or no commission. P.I. believes that, ideally, these stocks will prove so strong they can be held forever. So far it's been right. Over the past three years the Legacy stocks have outperformed Standard & Poor's 500 by more than 50 percent. Here they are: DQE, Exxon, Region's Financial, SCANA, Texaco, US WEST.
- Municipal bond investors could do worse than heed this piece of advice from the dean of bond-fund managers, Vanguard's Ian MacKinnon: Lace your portfolio with a healthy dose of bonds trading well below par. "Although there can be a slight tax disadvantage to such munis, they're much better positioned to participate in rallies. Bonds already trading at par or above are likely to be called away when prices rise."
- Balanced funds hold stocks and bonds in the same portfolio to temper market risk. This strategy seems to work even better with international funds than with domestic. According to Ibbotson Associates (312-616-1620), since 1980 a model foreign fund of 60 percent stocks and 40 percent bonds produced a 14.3 percent compound annual return in U.S. dollars. That's nearly all the return of foreign stocks with just three-quarters the risk. Prominent global balanced funds: Fidelity International Growth & Income (no-load), G.T. Global Growth & Income (load).
- Any central-bank gold-selling will probably depress the gold market only temporarily, unless there's a currency crisis, believes Interinvest Review & Outlook (84 State St., Boston, MA 02109). "Even then, currency chaos is ultimately bullish for gold. Investors shouldn't forget that weak currencies are invariably tied to central banks with depleted gold reserves."