If you could love only one. 01/04/93 (stocks)
Steven Ramos
Forbes
Page 74
COPYRIGHT 1993 Forbes Inc.
Every year we put to a panel, of stock pickers this question: Which stock
would you buy (or sell short) if you could buy only one? Our bulls beat the
market in 1992. On to 1993.
Last year in this issue, as we have done for many years, Forbes asked a
group of stock analysts to pick just one favorite stock each for 1992. Our
seventeen 1992 pickers did well. From mid-December 1991 to mid-
December 1992, the 12 bullish contestants' picks rose 45% on average.
This soundly beat the Dow industrials, the S&P 500 and the Wilshire
index, all of which gained about 14%.
As a kind of insurance policy last year we also asked five bears to name
their pick-just-one favorite short sale. It just wasn't a good year for shorts.
The average of the five shorts was up 8%. The short list was at least
successful in underperforming the market.
As is our custom, we invited the most successful players back for another
try, dropping the poor performers and replacing them with fresh faces.
Our new list of picks, in the table below, has nine U.S. stocks and three
foreign ones to buy, and five stocks to short.
The returning champ is Byron Sanders of Sarasota, Fla.-based Kashner
Davidson Securities. Sanders' 1992 pick, LaserSight, which makes lasers
used in eye surgery, nearly quadrupled. Sanders isn't straying far with his
1993 selection. Ophthalmic Imaging Systems makes Glaucoma-Scope, a
device to detect the onset of glaucoma at an early stage.
Presidio Management's Van Brady is beginning to look like an
undiscovered Peter Lynch. He finished first in the 1989 and 1991 horse
races. The stock he picked a year ago, EMC, better than tripled.
Someone who bought his last four recommendations in succession would
have multiplied his money twenty-four-fold.
Brady's favorite for 1993 is another computer-related outfit, Cheyenne
Software, which makes software for backing up and restoring files on a
personal computer network. "They are positioned very well for the major
trends in information processing that we see developing for the rest of the
decade," he says.
Alan Bond, chief investment officer of Bond, Procope Capital
Management of New York, got a double from CML Group, an exercise
equipment manufacturer. Bond's new choice is Home Depot--a stock one
of last year's less successful participants recommended as a short play.
Bond says Home Depot still has plenty of room to grow, since this
low-cost retailer has but a 6.5% share of the fragmented home
improvement market.
Now for some new, blood. Theodore Rosenberg, a portfolio manager at
Burney Co. in suburban Washington, D.C., is high on Boeing. Why, with
the defense budget shrinking and the airlines busy canceling airplane
orders? "Boeing is selling as if it were a cyclical when, in fact, it is a growth
company," says Rosenberg. It is, after all, among America's leading
exporters.
Alison Bisno, director of research at Stephens Inc., in Little Rock, Ark., is
choosing Taco Cabana, a Texas-based chain of 57 Mexican restaurants.
Bisno likes this firm's freshly prepared food, sit-down dining and
reasonable prices. "The Mexican segment is the fastest growing, and it has
really become a staple in the U.S. dining scene," says Bisno.
Lesa Sroufe, director of research at Ragen MacKenzie, a Seattle-based
brokerage, recommends supercomputer company Cray Research. This
former star is trading near a five-year low. Sroufe thinks cost-cutting and
new products will prove to be Cray's salvation.
First Manhattan's Thomas Tashjian likes Merry-Go-Round Enterprises.
This company has about 1,000 apparel stores that cater to
fashion-conscious youngsters (mostly 30 and under). "As shoppers
become more confident about the economy, they drift away from basic
replenishment of clothing to a more whimsical style," Tashjian says.
From Carlene Murphy, comanager of the Strong Common Stock Fund,
we get Littelfuse. "Not many people have heard of it," she says, "but it is
the leading worldwide supplier of fuses for automobiles and electronic
equipment." Littelfuse (sales, $155 million) was distributed to bondholders
in the bankruptcy reorganization of Tracor. At a recent 16 1/2, it trades at
27 times projected 1993 earnings.
Our returning guru on foreign stocks is Nicholas Reitenbach, director of
international investment at Pinnacle Associates. His Hong Kong & China
Gas from last year rose 55%. Reitenbach's new favorite is
Switzerland-based Sandoz, the drug and chemical company. Reitenbach
likes its expanding net profit margin. The American Depositary Receipts
trade over-the-counter.
Hutchison Whampoa, a Hong Kong-based container terminal, import and
export, and real estate company, is the pick of Elizabeth Tran of
Prudential Asia Fund Management in Hong Kong. The stock has been
asleep as the Hang Seng has shot up 87% over the last three years.
Whampoa is a bargain, Tran says, now that it's moving past its biggest
problems, yet is trading at nine times estimated 1993 earnings.
And now for the bears. Two of our contestants from last year are back.
Robert Doviak II of Doviak Partners in Dallas scored a bull's-eye with
College Bound last year. Selling at 21 1/4 then, the stock is now
worthless. This year Doviak says Wisconsin Pharmacal, a seller of fishing
bait and insect repellent, could be in for some trouble. It has a market
capitalization of around $60 million but sales of only $13 million. Doviak
doubts that the company can be successful with its new venture: female
condoms.
David Hines, of Hines Management, the other returning short-seller, is
now bearish on McAfee Associates. During the Michelangelo computer
virus scare earlier last year, McAfee garnered tons of free publicity for its
antiviral software. That helped McAfee's initial public, offering.
Notwithstanding the equity issue, the company's prospectus "reads like a
short-sale recommendation," Hines says, citing new competition and a
huge tax liability left by previous owners, among other things.
Eagle Hardware & Garden, the high-flying Seattle-area retailer, is a stock
you wish you had shorted a month ago. Never mind, says Jonathan
Merriman, partner at Merriman Capital and portfolio manager at Dabney
Resnick Asset Management; it's still worth shorting. "Home Depot has
Eagle beat on just about all counts," says Merriman. Eagle trades at 25
1/2; Merriman thinks it's worth half that.
Stephen Carlson, a partner of Denver-based Aspen Capital Group,
expects trouble at Alco International Group, a shipping and medical
products concern that started life as Thoroughbred Horse Co. Carlson
points to past legal problems of an Alco insider, a weak balance sheet and
a switch in auditing firms.
Robert Holmes, president of Gilford Securities in Chicago, expects a
collapse at McDonnell Douglas. "They are drowning in debt and their
commercial aircraft business will eventually be shut down," predicts
Holmes.
See, you next year. |
