stitch: well, I may be wrong...but...here's my picks, and where I am buying:
drillers, oil/gas firms- I think the "glut" will disappear quickly
health care- room for growth, room for consolidation
electric utilities: the ultimate beneficiaries of the internet
specialty software and telecom
investment management and brokerage- growth and consolidation.
small S&Ls- tremendous consolidation will happen here.
mobile homes and RVs- one out of every three homes is a mobile home, I think the growth will continue, and spread into Mexico and elsewhere.
This index has room for growth, it's 25% undervalued relative to the S&P. Every time a small company is bought or merged there's another one voted into place- note Burr Brown was just added (interesting choice, as I think the market has radically underestimated the market for analog devices). SO the index will grow just because the index is a voting machine; as an investment it will continue marching along, but won't be tax-efficient- the turnover rate keeps increasing.
The other smallcap index- the Russell and Wilshire- is harder to buy.
I bought OTCM as a proxy for a Russell index fund- it offers a 10% dividend so I can reinvest the dividends and let it march on for twenty years (hopefully Royce has trained a competent heir to manage his fund).
I'm willing to bet the investment climate will change radically in the next decade- growth will slow and the boomers will demand yield and not growth. Again, I may be dead wrong, but I think residential REITs, health-care collectives, electric utilities and S&Ls will be favored investments. For long-term investments (my time horizon on these is 15-20 years) just a little bit- 50 shares- of the little ones with huge dividends and setting up dividend reinvestment. The prices on smallcaps are quite reasonable, for my purposes I might as well buy them here and let time take care of the rest.
I'm inclined to think the emerging markets will emerge within the next ten to fifteen years and some huge companies will emerge from them, but these companies are microcaps right now and that's where the action is. The stocks of the investment houses are more profitable than their funds, so again I've been picking up a few shares of the smallest mutual-fund and investment houses and reinvesting dividends- good picks here are barra, eaton vance, legg mason, pioneer, southwest securities, jeffries. This gives a diversified international portfolio with little downside risk- it's easy for investment houses to merge or buy back stock if times get bad. And it's tax-efficient. |
