This lengthy bull market is not a favorable omen, according to Investor's Digest newsletter (2200 S.W. 10th St., Deerfield Beach, FL 33442-8799). "Over the past two years, the Dow has climbed over 75 percent. Only five two-year periods in this century have ever exceeded that advance. After each the Dow lost an average 6 percent in the next year, 18 percent over the next two years, 11 percent over the next three years, and 24 percent in the following five years."
- Compass Capital Small-Cap Growth Equity Portfolio has produced 26.7 percent average annual gains over the past three years by combining quantitative screens with company-specific research. It first looks for small stocks with revenue-growth rates of 20 percent or more that are in their industry's top third on this basis. It then selects buys based on strong finances, low debt and quality management. Recent favorites: Aspen Technology, Network Appliance, Converse Technology, Vitesse Semiconductor, Acxiom, InaCom and Uniphase.- The medical device and equipment industry appears poised for accelerated sales and earnings growth over the balance of this decade, says Standard & Poor's Outlook (25 Broadway, New York, NY 10004). "Medical device manufacturers should benefit from the aging of the population, overseas expansion, a steady stream of new cost-effective products and a more favorable regulatory climate in Washington." The Outlook's favorite medical-device stocks: Boston Scientific, Medtronic and U.S. Surgical.
- The payout ratio on the S&P 500 recently reached a record-low 35 percent of after-tax earnings. In an attempt to find growth stocks that could raise their dividends, Market Guide Database Service went looking for dividend-paying stocks that have gone public in the past three years and have payout ratios below that 35 percent. It found nine, all with relatively low debt-to-equity ratios: AVX, Case, Executive Risk, Martin Marietta Materials, Norrell, Reliance Steel, Riviana Foods, Security-Connecticut and Western National.
- Today's junk-bond market rewards investors who buy the debt of companies with improving credit characteristics or that seem ready to emerge from a restructuring or bankruptcy with their businesses intact, says Dabney Resnick Imperial, which specializes in high-yield bonds. "If their fundamentals improve, such bonds can yield 25 percent to 30 percent annually in interest and appreciation." D.R.'s favorites: ValuJet Airlines, Farm Fresh, JPSTextiles.
- Morningstar Mutuals (225 W. Wacker Drive, Chicago, IL 60606), the excellent fund-rating publication, recently compared all 1,536 funds it follows to see which fund families produced the best overall results in the four major categories. The winners: domestic stock, T. Rowe Price ("straightforward approach delivers one-two punch - high returns, low risk"); international stock, American Funds ("big, blue, boring, beautiful"); taxable bond, Colonial ("a surprising turnaround"); municipal bonds and Franklin Templeton ("big yields").
- According to recent figures from the World Gold Council, demand for gold fell less than 2 percent last year, vs. a 4 percent drop in production. Most of that decline in demand was attributable to a single country - China. "New laws allowing gold jewelry to be sold at a markup should improve demand there in the future," says Adrian Day's Investment Analyst (Box 3217, Silver Springs, MD 20918). "And the current supply/demand deficit in gold exceeds the entire output from South Africa, still the world's leading gold producer."