Dow 36,000!
It may come faster than you think
By Jeff Clabaugh
Last Update: 3:22 PM ET Dec 26, 1998
Now that's a forecast! Granted, the mind making the forecast gives the Dow
industrials 16 years to get there, but doesn't think Dow 18,000 in the next
decade is out of the question. That mind is conservative investor Francis X
Curzio and he is featured in Investools.com's Daily Advisory. Curzio says the
Dow will get there because money will keep flowing like water into the
markets and he says taxes are driving the flood of money there. Curzio says
with two income households and rising tax bills, it is easy to see why 401(k)
pre-tax investments are so attractive. The security markets then stand to be
the big benefactor. Curzio says to capitalize, investors should take a look at
his picks. On the conservative income table he puts Dreyfus Strategic
Government Income (DSI), Fort Dearborn Income Securities (FTD), and
Putnam Dividend Income (PDI). Curzio growth and income picks include
Sbarro (SBA) and Skyline Corp. (SKY). And his aggressive small cap
choices include Churchill Downs (CHDN) and Canada Southern Petroleum
(CSPLF). See full story.
Putting contrarian theory to the test
What exactly is a contrarian investor? Morningstar's
Kevin McDevitt delves into the subject at
Morningstar.net's Stock Analyst Journal and he's not
so sure most investors would have the stomach for
the pure contrarian approach. McDevitt is using the
principles of contrarian fund manger David Dreman of
the Kemper-Dreman High Return Equity Fund
(KDHAX) to put the theory to the test. He says
Dreman's method is based on simplicity. He buys the
cheapest blue chip stocks without worrying too much
about forecasting earnings. In fact, McDevitt says
Dreman thinks more information can sometimes lead
to worse decisions. McDevitt put together a list of
candidates based on price/earnings multiples. The
names that came up look scary. Farm equipment
manufacturer Case (CSE) has lost 67 percent this
year. Oil services firm Tidewater (TDW) has dropped
60 percent. Liz Claiborne (LIZ) is closing stores in the
wake of poor sales and falling overseas demand. But McDevitt says buying
companies like these is the very spirit of contrarian investing. Will they beat
the S&P 500 next year? McDevitt plans to follow the portfolio for a year, but
points out Dreman himself has topped the S&P benchmark by an annualized
one percentage point over the past 10 years. See full story.
High tech turmoil
If you're investing in high tech stocks, the advice posted on the
MarketMavensReport is "be patient." That doesn't much sound like advice
you need right now, given the incredible run-up by many of the hot high techs
this year. But next year might be different. In MarketMaven's weekly Industry
Outlook, writer Andrew Leckey says high tech is the wave of the future, but
the problem is a transition to the future is rarely seamless and comes in a
combination of fits, starts and wrong turns. Some of those fits and starts
might be coming from government battles like the ones facing Microsoft
(MSFT) and Cisco Systems (CSCO). He quotes Michael Murphy, editor of
the California Technology Stock Letter, as saying Microsoft will someday be
broken up into two companies. But Murphy added, "If I wound up owning two
Microsofts instead of one, I could live with that." Leckey also thinks antitrust
investigations will be a constant in the technology business because as
these businesses mature, inevitably a few large companies are all that
remain standing. What are the good tech buys for the patient
investor? Michael Tucker, tech analyst at Federated Investors, tells Leckey
he likes companies like America Online (AOL), Yahoo (YHOO) and
DoubleClick (DCLK), but because of this period of market uncertainty and
their high multiples, he thinks this is a poor investment time for those stocks.
Among the big name stocks analysts tell Leckey are worth holding for the
patient investor; Cisco, Intel (INTC), Compaq (CPigQ) and Lucent Technologies
(LU). But Murphy adds one caveat -- dollar cost averaging. Famous name
stocks must be bought when they're knocked down because their prices get
overblown when all is going well.
Bumpy road for Delphi's spinoff?
Delphi Automotive Systems could get a lot of attention when it hits the
IPO market. But does the company have what it takes to strike out on its
own? Hoover's Online writer Lisa Glass Mueller takes a look at the Delphi
spinoff in Hoover's Company Of The Day column, and she writes Delphi does
have some headaches ahead. As the auto parts unit of General Motors (GM),
Delphi hopes its IPO will give it more freedom to pursue business with other
automakers. The offering could raise up to $2 billion. GM will keep 82 percent
of the company initially, but sell its stake completely before the end of next
year. And while Delphi will be bigger than its competitors like TRW (TRW)
and Dana (DCN), it still faces the risk of union disputes, high labor costs and
competition for GM's business without the advantage of being a GM division.
Mueller writes that Delphi will have to go into negotiations with the UAW
within months of being on its own. And the union itself is opposed to the
spinoff. See full story.
Safe seats on a rough flight
It hasn't been a great year for the airline industry, and unless the Asian
economy turns around, it may not be a great year ahead. Briefing.com's
Sector Ranking takes a look at the beleaguered airline industry and finds
trouble ... and some safe bets. The report confirms economic difficulties in
Asia, Latin America and the threat of a worldwide economic slowdown in
general have grounded the group the last couple of months. It also says labor
unrest is adversely impacting the industry. Bad timing. Labor costs are on
the rise just as demand is declining. Briefing.com says the market has
overreacted to the negatives, but it will be tough for the industry to sustain
much of a comeback given the tough earnings comparisons that lie ahead.
Briefing maintains a near-to-intermediate-term "market perform" rating. But
Briefing says fundamentals remain solid and it is optimistic the group will
regain its winning form in the long-term. Briefing likes changes in the wind
like the growing use of Internet bookings that are helping to reduce costs and
oil prices that continue to decline. And its writers expect more consolidation
in the airline industry. Best long-term value plays on Briefing's list are United
parent UAL (UAL) and American Airlines' AMR (AMR). And it gives
domestic and regional carriers Alaska Air (ALK) and Southwest Airlines
(LUV) a nod, saying they're better positioned over the near-term. See full
story.
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