One unpublicized factor that will continue driving the stock market higher is that many investors now realize there's more money to be made as corporate owners than as corporate lenders, says Blue Chip Growth Letter (7811 Montrose Road, Potomac, MD 20854). "Not only are stocks outperforming bonds, but money is pouring into the stock market from the bond market. Many investors prefer to pay 20 percent federal taxes on stock market gains rather than the 39.6 percent rate on taxable bond interest."
MAS Funds Midcap Growth Fund, which has appreciated a spectacular 41.5 percent annually over the past five years, uses a three-part stock-selection process. First it applies quantitative criteria to narrow the pool of eligible issues. Then it employs fundamental analysis to measure sales growth, profit margins and return on capital. Finally, its valuation programs identify undervalued securities. Recent favorites: VoiceStream Wireless, McLeodUSA, JDS Uniphase, Lincare, AT&T, Western Wireless, Qualcomm.
In three years, predicts Dennis McKechnie of Pimco Innovation Fund, more people will connect to the Internet from their cell phones than from their PCs. Among McKechnie's favorite stocks are companies that facilitate connection to the Net from wireless phones. His four top picks are all rapid growers that are richly valued and thus best suited for risk-takers: Phone.com, Portal Software, RF Micro Devices, Research in Motion.
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.