"The long, slow economic recovery has produced little inflationary pressure under Fed chairman Greenspan's guiding hand," notes Mutual Fund Forecaster (2200 S.W. 10th St., Deerfield Beach, Fla. 33442-8799). "The danger is that the economy is, albeit gradually, approaching full capacity in the labor and capital markets. The stock market's high valuation poses a substantial threat of correction, especially since there hasn't been a decline over 10 percent in five years. Our econometric models project a 12 percent decline over the next 12 months."
- Over the past five years, Putnam New Opportunities Fund has been the top-performing growth fund, rising 377 percent, compared with 125 percent for its average peer. Portfolio manager Dan Miller credits two factors for this superior record: a team approach to stock picking (using six fund managers and four analysts) and a penchant for the fastest-growing stocks (average earnings growth rate: 38 percent). Recent favorites: America Online, Apria Healthcare, HFS, Infinity Broadcasting, Vencor, Viacom.- Food stocks have trailed the market's hefty advance. Standard & Poor's Outlook (25 Broadway, New York, N.Y. 10004) expects the group to start outperforming soon as investors deal more defensively with high stock valuations and slow economic growth. "Food company earnings have been improving thanks to industry-wide cost reductions and more efficient distribution. We also expect takeover activity to remain brisk." The Outlook's favorite food plays: Campbell Soup, ConAgra, CPC International, Heinz, IBP, Sara Lee.
- Dividends usually rise after an increase in corporate earnings. But not last year. That's understandable, says Edward Kerschner, chairman of Paine Webber's investment policy committee. "Corporations hate to cut dividends, so they're exceedingly cautious about raising them." Kerschner expects dividends to play catch-up this year, though, with the Standard & Poor 500's dividend growth rate rising from 6 percent last year to 12 percent. Among the likely boosters: Chrysler, Coca-Cola, Fannie Mae, General Electric, Johnson & Johnson.
- Don't let the spectacular decade bonds have just had fool you, warns Kiplinger's Personal Finance Magazine (1729 H St. N.W., Washington, D.C. 20006) "The 10-year annualized gain for 30-year bonds has been 11.5 percent. To equal that over the next decade, the yield would have to plunge from its recent 6.8 percent to an unprecedented 0.5 percent. The easy money has already been made."
- From June 1, 1989, to May 31, 1994, the average growth-stock fund had an average annual gain of 12.5 percent, according to a recent study by Morningstar Mutuals (225 W. Wacker Drive, Chicago, Ill. 60606). "But the average investor in those funds actually posted a 2.2 percent loss due to constant switching in and out. Successful investing is the result of patience over the long term. Be prepared to stick with a mutual fund for a minimum of three years and preferably five."
- When dealing with brokers, avoid thinly traded stocks with large spreads unless you're sure you have a winner, advises Forbes. "If the bid is $4 for a stock with a $3.50 asking price, you'll need a 13 percent price rise just to break even. You may be able to reduce this spread by dealing directly with an OTC stock's market-maker and using limit orders. They're more expensive, but they can result in dramatically lower transaction spreads."