Steve,
The chart is awesome...reversal big time. I thought last week we would see 36, IMO it will be there soon enough.
askresearch.com
NEW YORK (Dow Jones)--Hersh Cohen, who has managed the $3.07 billion Salomon
Smith Barney Appreciation Fund since 1979, has been through a few bear markets.
So when some of the fund's core stock holdings started to take a beating in the
second half of last year, he tried to keep it in perspective.
Cohen chalked up much of the declines to tax-loss selling by funds that have
to report capital gains before the end of the calendar year, and pinned his
hopes on a rally in the new year. He was right about the rally, but misjudged
how narrowly based in technology stocks it would be.
"I came into 2000 defensive. Until last Wednesday, the situation kept getting
worse. But I was on the phone with these companies every week, asking them what
was wrong."
Not only was nothing wrong, he was told, but business was better than ever. So
Cohen took some of the cash he'd been sitting on and increased the fund's
holding in such out-of-favor, bricks-and-mortar stocks as Great Lakes Chemical
Corp. (GLK), Household International Inc. (HI), Kimberly Clark Corp. (KMB),
Procter & Gamble (PG), Chubb Corp. (CB) and McDonalds Corp. (MCD).
He was vindicated last Wednesday, when a rally in "old-economy" stocks lifted
the Dow Jones Industrial Average nearly 500 points, a record for a single day.
Household International, which hit a 52-week low of 29 1/2 on Feb. 24, has
since rebounded 32%, as of Thursday's close. The company announced earlier this
week that it plans to buy a $2.15 billion sub-prime real-estate loan portfolio
from the consumer-finance unit of Bank One Corp. (ONE) .
Kimberly Clark, which struck a 52-week low of 42 on March 7, has since risen
27%.
Procter & Gamble is now up 6.5% from its 52-week low of 52 3/4 on March 10.
McDonalds has risen 18% from its 52-week low of 29 13/16 on March 7.
Chubb is 38% better than its 52-week low of 43 1/4 on March 8.
Great Lakes Chemical has advanced 20% from its 52-week low of 26 3/4 on March
8.
Buffett Also A Buyer Of Great Lakes
Cohen notes that Warren Buffett has also been buying Great Lakes. The fund
manager bristles at the idea that Buffett has been discredited because he didn't
foresee the dot-com mania. Buffett's Berkshire Hathaway (BRKA, BRKB), which is
the Appreciation Fund's biggest holding, has gained 33% from its 52-week low of
40,800 on March 10.
Although all of these stocks are still below where they started the year, last
week's rally pulled the Appreciation Fund out of the hole. It has returned 1.27%
in the year-to-date, underperforming both the S&P Index and the large-cap blend
fund sector, according to data from Morningstar.
"We're back to square one in value stocks," Cohen said.
The Appreciation Fund doesn't eschew high-tech stocks, per se. It has
longstanding positions in Intel Corp. (INTC) and Cisco Systems Inc. (CSCO), and
Microsoft Corp. (MFST) is its second-biggest holding. But the fund's strategy of
investing in companies with strong or rapidly improving balance sheets with
industry leadership and a management team committed to earning consistent
returns for shareholders often results in "old-economy" picks.
Cohen said he has no idea when these stocks will come back into favor. "This
is a market that has braced momentum. People are confusing it with investing. A
big shift on a permanent basis won't happen soon."
Nevertheless, he believes there's still room for a conservatively managed
equity fund. "In low-multiple stocks, there's plenty of room to go up if flows
would change. But I don't see much room in the high-fliers."
-Allison Bisbey Colter; Dow Jones Newswires; 201-938-5298
allison.bisbey-colter@dowjones.com
(END) DOW JONES NEWS 03-24-00
03:00 PM |
