Non-U.S. stocks, especially in Europe, are now trading at much more attractive valuations than our domestic counterparts, says Morgan Stanley Europe strategist Richard Davidson. "Now is one of the few times in the investment cycle when you can buy quality stocks at beaten-down prices. This period may prove similar to the early 1970s, when the Nifty Fifty began their ascendence in the U.S. Avoid European turnaround situations, though. Most companies being forced to restructure are unlikely to reward shareholders."
In this tough environment for international stocks, BlackRock International Opportunities Fund has still produced 15 percent average annual gains over the past five years. It's done this by emphasizing macroeconomic factors such as relative economic growth in specific overseas countries, expected inflation levels, government policies and currency relationships. It then looks for undervalued stocks with strong earnings growth. Recent favorites: Roche Holdings, GlaxoSmithKline, BP Amoco, Unilever, Telefonica, Royal Bank of Scotland.
High Tech Strategist newsletter (1-603-888-3954) thought technology stocks were still vulnerable two years ago. It still thinks so. A few exceptions: EDS, a service company that recently sold for just 0.3 times sales; and a number of software companies, such as Amdocs, NetIQ and Rational Software, which recently sold at, or near, the cash on their balance sheets. The newsletter believes all have established solid franchises.
To identify cheap stocks with healthy yields and significant appreciation potential, Value Line (220 E. 42nd St., New York, NY 10017) recently went looking for companies yielding at least 3 percent and whose shares it believes can rise at least 75 percent over the next three to five years. It then recommended seven whose price/earnings multiples, at an average 9.4-to-1, are about half the general stock market's. The seven: Astoria Financial, Dofasco, Hudson United Bancorp, Lone Star Steakhouse, Telecom New Zealand, Washington Mutual, Worthington Industries.
Falling interest rates have produced a bull market in government bonds. But they haven't done much for corporates. Merrill Lynch fixed-income strategist Tom Sowanick thinks that may be about to change. "It seems to me that, based on corporate bond issuance, interest rates are now low enough that companies are starting to take advantage of it. So will investors. With equity uncertainty so high, we could see lots of money flowing into the corporate bond market."
With money-market mutual-fund yields plummeting to unheard-of levels (many now yield less than one-fourth of 1 percent), some old kids on the block are getting renewed attention, says Kiplinger's Personal Finance Magazine (1729 H St. NW, Washington, DC 20006). "Money-market deposit accounts are bank products that pay more than regular checking accounts but limit you to three or fewer checks per month. They've long been overshadowed by less-restrictive money-market funds, but unlike such funds, they carry the same $100,000 of federal insurance that applies to regular savings accounts."
Site of the Week: Go to www.bankrate.com for the best place to find great MMDA deals. Smaller banks often offer special Internet rates to attract national customers and to lure some of the $2 trillion residing in money-market mutual funds.
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.