Nice words, for what its worth. AMAT mention towards the end
Hold On to Your Cash Till After the
Election
By Mary Rowland
Start Investing Columnist, MSN MoneyCentral
10/11/00 1:20 PM ET
I sometimes think I should offer my job to one or another of the able members
of our Start Investing community. Last week it was Betsy Cone, who asked
two great questions on the same afternoon and blended in a good joke as
well.
"Another oddly quiet day," Betsy wrote on Oct. 3. "The number of new posts
is as thin as real hair on a Rolling Stone." What she wanted to know, though,
was if any of us planned to start pumping some cash into the market. "The
financial press often makes mention of uninvested money on the sidelines,"
Betsy said. "I've got some. Do you?"
I do. A lot. "What event are you waiting for that will make you click that
mouse and put it back into the game?" Betsy went on before reviewing the
day for us: Biotech down 7%. The Nasdaq below 3,600. Finally, she admitted
market timing has a bad rap, and she wanted to know if any of us had used
the Nasdaq as a buy signal.
A good question. If you've got cash, you must be waiting for something.
"Anybody want to stick their neck out and admit to waiting for a specific
event?" Betsy demanded. "I know you're out there."
What Are You Waiting For?
"Saak" actually had a specific answer. He is waiting for the end of December
when Oak Associates, the Akron, Ohio, firm that manages the highly
successful White Oak Growth Stock fund, plans to introduce its Black Oak
Emerging Technology fund. There's a man who knows what he wants.
My co-host, Tim Middleton, told us that he has just $5,000 in cash, and he's
waiting for Cisco Systems (CSCO:Nasdaq - news) to go below $50. He didn't
tell us, though, if he would buy it then or if that was just a signal for him.
Although her two questions didn't appear to be connected, the second one
went a far stretch toward answering the first one for me. Betsy asked which
sectors we all thought would do well if George W. Bush is elected president,
and which would do well under Al Gore's leadership.
She'd read a list that suggested that a Bush victory would be good for
Microsoft (MSFT:Nasdaq - news), as well as the defense, energy, health,
forest and tobacco sectors. Gore would be a plus for agricultural companies,
satellite makers, insurance companies and tax consultants.
That list makes sense to me, although I think energy might be a winner either
way. I also think health care is at a big risk with Gore as president. He
criticizes the industry a lot and likes to tell stories like the one about his dog
and his mother-in-law taking the same medicine but the dog's prescription is
cheaper. That's not the kind of talk that makes for a boom in the health care
sector.
Beyond that, though, I think this election might be a big deal for investors,
and it's one of the reasons that I've been hesitant to invest my cash, Betsy.
'Even Steven,' the Market's Friend
Last week I got an email from a psychologist who told me that one reason for
the market's strength under Bill Clinton was the gridlock caused by having a
Democrat in the White House and a Republican majority in Congress.
Nothing got done. Grease the skids for some real action and the market
might not like it, he said.
The psychologist makes a good point. A change in government can throw the
market off its stride. I want to see how things settle out before I start clicking
my mouse in earnest. Of course, the market discounts events like elections
in advance. And we're seeing some of that now.
But a change in government might argue for more diversification. Last week I
suggested Europe as an investment option. The more I thought about it, the
more I liked it.
International investing is not the great diversifier it once was. More and more,
we have a global economy and more and more, the U.S. market is the engine
of growth. So I don't believe that if the U.S. market tanks, Europe will be a
beacon on the hill. No way. But I still like Europe. And I like diversification. In
the Start Investing portfolio, I initially recommended a 10% stake in Europe,
and I suggested last week that some investors might consider upping that to
15%.
For beginning investors, I recommended Vanguard European Stock Index
because it follows an index, in this case the Morgan Stanley index, and I feel
some beginners do better without a portfolio manager to monitor.
But when I invested in Europe myself this week, I didn't buy the index. I
bought a managed fund. I chose Invesco Europe, a fund with a strong record.
It provides a good lesson, too, on how indexes and managed funds differ. The
Vanguard Europe index fund has about 10% in technology. Invesco Europe
has more than 30% in technology, one of the reasons for its much stronger
showing this year.
Making a Move
I made one other decision, this one almost entirely as a result of reading
Betsy's post. I'm often asked how writing an online column and chatting in the
communities has changed me as an investor. The answer? I take a lot more
action than I used to. Sometimes that's good and sometimes it's bad.
In this case, I thought about what Betsy said and I decided to look at some
stocks that had been beaten down. Intel (INTC:Nasdaq - news) and Applied
Materials (AMAT:Nasdaq - news) were top candidates. I already owned both.
So why did they collapse? The argument you can make with Intel is this: The
world is changing. Personal computers won't be as important in the future.
Intel probably can't continue selling chips for $600. I think that underestimates
Intel. But it carries some logic.
I can't make the same argument about Applied Materials. This company is
not going away. It dominates the business of making equipment folks need to
make chips. If Intel doesn't need as much equipment, someone else will. Of
the six or seven sectors in that business, Applied Materials dominates five. If
you want to set up a chip company, you're going to be giving Applied
Materials a call.
Yet the stock dropped $5.06 to $51.63 on the day Betsy posted her question,
not because of Betsy, of course, but after a downgrade by Wit SoundView
Group.
I think Applied is one of those solid growth companies that will be around for a
long time. That's why I have it in my portfolio. And, thanks to Betsy Cone, I
added substantially to my holdings at a good price. There's my answer.
Mary Rowland is the Start Investing columnist for MSN MoneyCentral. At the
time of publication, she held shares of Invesco Europe, Intel and Applied
Materials. Under no circumstances does the information in this column
represent a recommendation to buy or sell stocks. She welcomes your
feedback at mctsc@microsoft.com.
At the time of publication, Mary Rowland owned or controlled shares of the
following equities mentioned in this column: Invesco Europe, Intel and
Applied Materials.
More from MSN MoneyCentral
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Markman's SuperModels
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