Investors poured a near-record amount of new money into mutual funds last year, observes Sy Harding's Street Smart Report (16 Daniel Webster Highway, Meredith, NH 03253). "And foreign investors put as much into U.S. stocks as in any year except 1999. Margin debt, after declining during the market's mini-crash, soared back to previous levels. Still, the market fell. It makes you wonder what might happen if those cash flows slowed just a little bit."
Reserve Private Small Cap Growth Fund has appreciated more than 40 percent on average annually during the past three years by sticking with sector-dominating little companies whose earnings are growing at least 25 percent annually. Manager Adele Weissman now anticipates a soft economic landing — exactly the kind of atmosphere in which small caps in emerging industries shine. Recent favorites: Accredo Health, Applied Micro Circuits, Caremark Rx, Chronimed, Documentum, HNC Software, On Assignment, Priority Healthcare, Tiffany.
Apparel stocks went into a tailspin in July 1998 and still haven't recovered. Yet there are many healthy companies in this section. According to FactSet Research Systems, the stocks of four clothing makers recently sold for single-digit price-earnings ratios, yet are expected to post at least 10 percent annual earnings growth over the next three to five years. All have significant insider ownership, which could facilitate an acquisition or a management-led buyout. The quartet: Nautica Enterprises, Polo Ralph Lauren, Tommy Hilfiger, VF.
In its never-ending quest for bargain-priced stocks, Standard & Poor's Outlook (55 Water St., New York, NY 10041) recently went looking for companies anticipating 20 percent-plus earnings gains this year. They found 10 that sell for below-market multiples and that the Outlook ranks "five stars" (highest) for appreciation potential and safety: Amkor Technology, Black Box, CommScope, MBNA, Novellus Systems, Orthodontic Centers of America, Prepaid Legal Services, RehabCare Group, Vishay Intertechnology, WorldCom.
Individuals who buy odd lots of a corporate bond will pay a point or more over the bond's bid price, observes David Goldman of SG Capital Management in New York City. "In contrast, you can get a Treasury bond in the secondary market for a half point over the bid price on the same-size lot. Trading corporate bonds is only for those who do so in $10 million chunks."
The attractiveness of individual closed-end funds, which trade like stocks on the various U.S. exchanges, depends on their current discount from net asset value, the history of that discount, the expense ratio and past performance. Using these criteria, Forbes recently rated these closed-ends "best buys": Turkish Investment Fund, H&Q Healthcare Investors, H&Q Life Sciences Investors, Gabelli Global Multimedia Trust, TCW Convertible Securities Fund, Japan OTC Equity, Argentina Fund, Royce Focus Trust, Invesco Global Health Sciences, Scudder New Asia Fund.
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