Current market strategy.
Recently, my theme has mostly been to buy low and not worry about the market too much. Sounds simple, but it can be hard to remember amidst today's volatility. Many small-cap stocks are down a lot, despite the S&P 500 being near record highs.
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My largest weighting (20-25%) is in utilities that have strong cash flow and 4-8% dividend yields. Although they've been strong recently, a lot of utilities havne't done much over the last 5-10 years. My utility portfolio is geographically diversified, with market caps ranging from $3-17 billion.
According to PG&E's CEO, a new wave of deregulation is coming which will "ultimately overshadow previous deregulation of the telecommunications, airline, rail and trucking industries." "To put the coming change in proper perspective, consider that the natural gas and electricity market is roughly the same size as the nation's long-distance telephone market PLUS the domestic airline market PLUS the computer software market!" biz.yahoo.com
In the future, utilties companies could well become enterprise-wide service providers, perhaps much like today's telecom giants. For instance, instead of being locked into the California market, PG&E is now providing nationwide energy solutions to Neiman-Marcus. In another package deal, it's doing the same for 800+ McDonald's restaurants in California. Perhaps it could be all restaurants nationwide in the future; the reason for a trend towards larger contracts is that huge bulk purchases reduce unit costs. Nationwide or region-wide economies of scale and scope will be crucial competitive factors; as a result, M&A activity should be brisk, increasing the valuations of many companies.
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Internet companies comprise about a 10% weighting, since I see Internet growth continuing. 1997 Internet online ad revenue will reach $1 billion this year, triple 1996's numbers. news.com A lot of my Interet stocks comprise the top-trafficked sites. For the top 25 sites in November, see biz.yahoo.com
When bandwidth finally reaches critical mass, Internet search engine companies could become the broadcasters of tomorrow to more affluent, highly specified target audiences.
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I've also started positions in Southeast Asian stocks and closed-end funds, some of which are down 75% from their peaks. I have a 5% weighting in some of the larger, more blue-chip Year2000 service providers, and may expand this somewhat. Presently have a 5% weighting in depressed disk drive leaders, and 2-3% weighting in the lowest cash-cost gold producers.
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For core long-term holdings I have a good-sized percentage in very large blue-chips, including financials, drugs, telecom equipment, consumer electronics, and semiconductor leaders with excellent R&D departments.
happy investing,
Philip |
