Two unprecedented factors justify today's higher stock prices, says Joseph Battipaglia, chief investment strategist of Gruntal & Co. "They are globalization and technological innovation. Neither will be reversed. While stock market gains may be a more modest 10 percent to 20 percent going forward, it won't be a matter of giving back all the gains and an adjustment downward. If anything, we have a new basis for the markets."
The stocks preferred by Preferred Growth Fund, which has produced average annual returns of 32.5 percent over the past five years, are those that offer growth at reasonable valuations. To that end, Preferred scrutinizes such numerical measures as expected sales growth and return on equity, and such qualitative characteristics as management quality, research and marketing. Recent favorite stocks: MCI Worldcom, Texas Instruments, Citicorp, CBS, Home Depot, Applied Materials.
Seeking the companies that are rewiring the world, Brian Hayward of Invesco Worldwide Communications Fund focuses on three main telecom themes: deregulation, the huge growth in data traffic, and the switch from wired phones to wireless. He currently favors the stocks of equipment makers (Cisco Systems, Tellabs) and direct-subscriber line plays (Covad Communications, North Point Communications).
When Thomas Hansberger retired from Templeton Funds in 1992, he opened his own global investment-management firm and hired top stock-pickers in populous countries with few financial analysts. Hansberger wants to own companies trading for less than six times what they could earn in five years. He currently likes these overseas blue chips selling for a fraction of the price of their U.S. counterparts: VA Technology (Austria, engineering), Sumitomo Trust (Japan, banking), Pliva (Croatia, pharmaceuticals), CVRD (Brazil, commodities), Air New Zealand.
The average discount to net asset value for closed-end bond funds was recently at its highest level in 20 years, observes The Turnaround Letter (225 Friend St., Boston, MA 02114). "There's no guarantee that today's discounts will disappear. But history suggests that they could narrow significantly. In this market, these seven funds' double-digit yields look pretty attractive: Franklin Multi-Income, High Income Opportunity, MSDW Global Opportunities, Oppenheimer Multi-Sector, Putnam Master Intermediate Income, Templeton Emerging Market Income, Zweig Total Return."
Looking for free Web sites where you can do research on small-company stocks? Kiplinger's Personal Finance magazine (1729 H St. N.W., Washington, DC 20006) suggests beginning at www.smallcapcenter.com. Among more general stock-research sites, Kiplinger's says you'll find good small-stock information at www.marketguide.com, www.moneycentral.com, www.quicken.com, www.stocksheet.com and www.investorama.com.
Investor's Notebook is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.