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Suggestions for tough times

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The Manufacturing Capacity Utilization Rate recently stood at an 18-year low, observes Growth Stock Outlook newsletter (P.O. Box 15381, Chevy Chase, MD 20825). "We're in a weak economy, which may well approach, or exceed, the extremes of 1973 or 1981. Virtually all the bullish economic forecasts come from those associated directly or indirectly with companies that have a vested interest in a higher stock market."

Big funds usually become dull, index-like performers. Not Fidelity Low-Priced Stock Fund. Despite a $10 billion portfolio spread across 750 different issues, Low-Priced keeps churning out exceptional gains — another 27 percent last year, and an average 18.1 percent annually for the past decade. LP concentrates on little companies with new products, focused managements and dominating positions in their markets. Recent favorites: D.R. Horton, Outback Steakhouse, AutoZone, Biomet, Applebee's International, BJ's Wholesale Club.

Media and entertainment stocks have always weathered difficult economic times, observes Personal Finance newsletter (P.O. Box 3808, McLean, VA 22103). "They're consumer franchises, so they can raise prices in inflationary times. They're also neither labor- nor energy-intensive, which insulates them from falling productivity growth and rising energy prices." PF recently recommended five media/entertainment giants with strong cash-flow prospects: AOL Time Warner, Disney, Fox Entertainment Group, Gemstar-TV Guide, Viacom.

Is there such a thing as a safe stock? No, admits Money magazine. But searching for relative safety, Money recently went looking for issues featuring four desirable qualities: relative immunity to economic swings; healthy dividends; strong balance sheets and long-term records; and underpriced valuations. It found 10 stocks that it believes fit all four bills: British American Tobacco, Citigroup, Dow Chemical, Equity Residential Properties, GE, Johnson & Johnson, Kimberly-Clark, Kroger, Pfizer, Reliant Energy.

"Terrorist threats may deepen the global recession we're already experiencing," says PIMCO's Bill Gross, the universally acknowledged dean of bond-fund managers. "Individual bond investors should focus on the short side of high-quality Treasury securities and should be leery of the longer end. Long-term Treasurys may be affected by fiscal pump-priming — the potential for Congress to ratify programs that reduce the surplus and produce deficits, and then, instill inflation in the economy."

When perusing those annual reports that are about to start hitting the nation's mailboxes, beware of public companies that change auditors, advises AAII Journal (625 N. Michigan Ave., Chicago, IL 60611). "When a company changes auditors, it's not always an innocuous event, especially if it has a history of changing auditors. Many times, such companies are using questionable accounting practices the auditor won't go along with. Eventually these companies are found out and their stock prices suffer accordingly."


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.