A dramatic drop in corporate spending on technology contributed to this economic slowdown. So before we see a rebound (and significantly higher stock prices) we'll "want to see improvement on the information technology side," observes Salomon Smith Barney economist Mitchell Held. The Commerce Department releases this information at the start of every month at www.doc.gov. In the report on total orders for manufactured goods, watch for new IT orders for sustained increases.
Growth Fund of America divides its assets between individual "portfolio counselors" and a team of research analysts that acts as a single manager. Each side directs its respective portfolios independently and is compensated according to performance. The managers pursue a broad range of investment styles with the common thread being above-average growth prospects. This team approach produced 26.4 percent average annual returns in 1999 and 2000, exactly double the average large-cap fund's gain. Recent favorite stocks: FHLMC, AOL Time Warner, FNMA, Viacom, Lowe's, Clear Channel Communication.
Semiconductors are early cycle stocks, observes Robert Turner of Turner Investment Partners, whose Micro Cap Fund had a 57 percent average annual return for the three years ending in September. "Any modest pickup in the economy almost immediately translates into a pickup in demand for semiconductors. And semiconductor inventory is now almost nonexistent. We're trying to hit three different segments with our favorite chip stocks: Micron Technology (DRAMs), Analog Devices (industrials/PCs), Texas Instruments (communications)."
If the economy does stay weak, it could drag the dollar down with it. That's good contrarian news for U.S. exporters whose goods would then be more favorably priced than their overseas competitors', both here and abroad. Standard & Poor's recently polled its analysts, asking them which public companies they expect to outperform if the dollar does slide. Eight of their picks sold for less than the market multiple: AES, FedEx, Hilton Hotels, Merck, Procter & Gamble, Shaw Group, Symantec, Thermo Electron.
When it comes to safety in money market funds, bigger is better, says Money Magazine. "The big fund companies also tend to keep their expenses below the 0.5 percent average, and low expenses are the only guarantee that a fund's yield will remain competitive. You can find the highest-yielding money funds listed in newspapers and on the Internet."
Of the 37 investment newsletters tracked over the past 15 years by the Hulbert Financial Digest, the industry's unofficial scorekeeper, only three have beaten the Wilshire 5000 stock index's average annual 13.4 percent gain over that period: MPT Review (19.1 percent annually; 1-800-861-5968), No-Load Fund X (14.8 percent annually; 1-800-763-8639) and The Prudent Speculator (14.6 percent; 1-800-258-7786). Investment Quality Trends newsletter (13.2 percent; 1-858-459-3818) was the risk-adjusted leader, since its gains were achieved with considerably less risk than the Wilshire index entails.
SITE OF THE WEEK: For an online financial discussion community offering boards where individuals can share investment ideas and strategies, go to www.luskinreport.com. Visitors can also converse with managers of the OnFund mutual fund, an interactive fund that provides real-time access to the managers' trading activity. Registration at the site is free.
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.