In most postwar periods, stocks have risen, observes Value Line (220 E. 42nd St., New York, NY 10017). "For example, after a period of declines and extreme volatility following Iraq's invasion of Kuwait in 1990, stocks recovered once coalition action was launched on Jan. 17, 1991. From that day until the war's end, on Feb. 27, the S&P 500 rallied 17 percent. Twelve months later it was up 32 percent."
Weitz Value Fund does things by halves. First it figures out a company's intrinsic value. Then it tries to buy its stock for half that value. Weitz doesn't just rely on statistical valuations, either. It also looks for good businesses with competitive edges and pricing power. It's found enough over the past decade to produce 14.37 percent average annual returns. Recent favorite stocks: Liberty Media, Berkshire Hathaway, Park Place Entertainment, Washington Mutual, Host Marriott, Golden State Bancorp.
The ongoing malaise in technology stocks has led Paul Wick of Seligman Communication and Information Fund to broaden his definition of technology. One sector he's moved into recently is medical devices. "This area doesn't have the saturation issues many info-tech companies have, and it sports huge amounts of intellectual property, high profit margins, high competitive barriers and no debt." Wick says his four favorite medical-device stocks "have solid fundamentals and look cheap: Medtronic, Millipore, Steris, Varian Medical Systems."
It's nice when your stocks pay generous dividends. It's even nicer when they don't deplete their cash to do so. A recent Credit Suisse First Boston study found that over the past 12 years, high-yielding stocks with low payout ratios significantly outperformed high yielders with high payout ratios. Money magazine recently went looking for stocks with lengthy records of dividend increases, low payout ratios and healthy cash-flow growth. Five standouts: Abbott Labs, Arthur J. Gallagher, Bank of New York, Citigroup, Washington Mutual.
The longer a bond's maturity, the greater the risk that inflation will erode its yield. You can eliminate that worry with Series I savings bonds, says Forbes. "Their interest has two components: a fixed rate, set at issuance, and an inflation factor, adjusted every six months based on the consumer price index. Recently the bonds yielded a combined 2.6 percent. You can buy them online at www.savingsbonds.gov.
According to Fordham professor Chandan Sengupta, author of "The Only Proven Road to Investment Success" (John Wiley & Sons, $28), retirees should put at least 10 to 15 years' worth of living expenses in ultra-safe investments, such as money market funds, CDs and short-term corporate bonds. Kiplinger's Personal Finance Magazine (1729 H St. NW, Washington, DC 20006) thinks that's much too conservative. "When was the last time the stock market produced negative returns over 15 years? Never. Only twice, during the Great Depression, did stocks produce negative returns over a 10-year period."
Site of the Week: See www.vcall.com for a free site that covers investor-relations events such as earnings conference calls, analyst conference calls, shareholder meetings, merger announcements, press conferences and product announcements.
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.