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Big stock growth reflects new era of robust profits

The market will continue to rise, report predicts

SHARE Big stock growth reflects new era of robust profits

We've just had three consecutive quarters during which the average stock posted more than 20 percent earnings growth, observes MPT Review (1 East Liberty, Reno, NV 89501). "Such growth has never occurred for more than one quarter before. We are in a new era of robust corporate profits. The stock market should continue to rise in the face of these record results."

Pin Oak Aggressive Stock Fund, which has appreciated a staggering 45.6 percent annually over the past five years, takes a top-down approach to small-cap selection. First it chooses the industries most likely to experience rapid growth. Then it selects the most promising individual players in those industries based on growth-rate/price-to-earnings comparisons and P/E ratios vs. both historical and current levels. Recent favorite stocks: Vitesse Semiconductor, JDS Uniphase, Brocade Communications, MBNA, Advent Software, Tellabs.

Biotechnology is clearly the wave of the medical future. The problem with individual biotech companies as investments, however, is that most have only a few products, which are largely unproven. Franklin Global Health Care Fund, which has appreciated 47 percent in the past six months, prefers to play biotech's revolution by accumulating the bigger, cheaper, more diversified pharmaceutical stocks with biotech partnerships. Its favorites: Abbott Labs, American Home Products, Bristol-Myers Squibb, Pfizer, Schering Plough.

Corporate earnings numbers can be manipulated. That's why Chicago's Holt Portfolio Advisory, which has returned 930 percent to investors since 1986, vs. 574 percent for the S&P 500, focuses on cash flow instead. Holt buys stocks whose cash-flow return on investment it believes will beat investor's expectations based on current share prices. And it buys only those whose upside potential it believes is twice their downside risk. Recent favorites: Casey's General Stores, Clarcor, Donaldson, Hormel Foods, Micros Systems, Southdown, SunGard Data Systems, Valspar, Whirlpool.

The longer a bond fund's maturity, the more sensitive it is to rising interest rates, observes Babson-United Investment Report (400 Talcott Ave., Watertown, MA 02472). "In rising rate environments, like today's, the safest place in the fixed-rate universe is bond funds with short average portfolio maturities or durations." BU's favorites: Metropolitan W. Long Duration, Vanguard Short-Term Corporate, Vanguard Short-Term Federal, T. Rowe Price Tax-Free Short-Term, USAA Tax-Exempt Short-Term, Vanguard Limited-Term Tax-Exempt.

Platinum's recent rally is only the beginning, predicts Personal Finance newsletter (P.O. Box 3808, McLean, VA 22103). "Japan's long recession has inhibited platinum demand. Plus, as the Chinese begin to tap their vast economic potential, demand for platinum jewelry will rise there as well. Even the American public has begun to value the metal. Its understated elegance contrasts sharply with the gaudiness of gold and the lower relative value of silver."

How much should it cost to hire a financial planner who won't be influenced by commissions? According to the International Association of Financial Planning (IAFP), fee-only advisers charge an average $1,160 to create a basic financial plan. In addition, some will manage your investments for an annual average of 1.4 percent of the amount under management.

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.