On Window dressing (Excerpts from Bloomberg)
Lee:
Here is a gimmick money managers seem to use to fool their unsuspecting customers. Well,I am not complaining,window dressing or not.<g>
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.....Window-Dressing
Computer and Internet companies are gaining as money managers who are lagging their benchmarks plow into winning stocks. This ''window-dressing'' aims to fool clients, so when they look at year-end statements they believe their money manager or mutual fund manager is in the know.
Optimism that the industry's profits can keep growing even as the world economy slows is helping the stocks. And no one knows how big Internet commerce will be. One study, from a division of Ziff-Davis Inc., said online holiday sales will reach $3.5 billion this year.
''Investors believe the Internet stocks have what seem to be unlimited growth potential,'' said Marc Klee, senior vice president with American Fund Advisors, which oversees $500 million.
Multiples, Incalculables
Now, soaring Internet shares are changing the way some investors value companies. Amazon.com shares rise by the day even as business losses widen. In contrast, Microsoft trades at 63 times the past year's earnings -- a lofty multiple by most analysts' standards, but a multiple nonetheless. ''Microsoft has a solid product and they have real earnings,'' said Dan Eagan, a money manager at BlackRock, which oversees $115 billion. ''At that price, they're very cheap, versus a multiple you can't calculate.''
Many professionals, particularly lagging managers, are reluctant to sell their winners before the year's out. That way they can delay hefty capital gains taxes until 1999.
Then, Eagan is hopeful investors' attention will shift to now out-of-favor commodity companies. He said shares such as International Paper Co. and Reynolds Metals Co. will prosper as long so the U.S. economy surprises the naysayers and continues growing.
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