Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Hewlett-Packard (HPQ) -- Ignore unavailable to you. Want to Upgrade?

To: Captain Jack who wrote (2025)	10/24/2002 8:23:14 AM
From: PCSS	Read Replies (2) \| Respond to of 4345

from Abby Joseph Cohen this morning: PART 1 World Investment Strategy Highlights Portfolio Strategy Overweight equities. We forecast a 29% return from global equities over the next 12 months. We are also overweight convertibles (expected return 16%). We are neutral commodities (8% expected return), underweight cash (3% expected return) and underweight bonds (2% expected return). We are not forecasting deflation, but it is a risk We can identify periods in the past where deflation has been accompanied by solid growth, profits and decent equity returns Œ in other words, iogood deflationld. Unfortunately, in an environment of sluggish growth, investors are more focused on a inbad deflationlt outcome. Margin power is more important than pricing power Margin power Œ the difference between price changes and unit cost growth Œ drives profits. Margin power has most potential at the bottom of the cycle when there is a lot of spare capacity and growth is re-accelerating. Our economists forecast an acceleration in OECD GDP growth from early 2003. Equity markets more exposed to deflation than the broader economy Equity markets have different sector weightings to economies, and listed companies are more prone to product price deflation than the underlying economy. Technology accounts for much of the observed price deflation, but over the last year equity market product price inflation has been zero even after stripping out technology. There are some sector bright spots Aside from the usual defensive sectors that are generating modest price increases, some areas of the materials and industrial sectors have generated price increases as well. Although some of these price rises may represent an early cycle iybouncell, limited capacity additions in recent years probably also play a role. Focus on spare capacity as well Sectors with significant spare capacity will enjoy a large decline in unit costs as demand fills the capacity gap. Combining our views on industry pricing power and the scope to bring down unit costs and enjoy margin expansion, we highlight paper, capital goods, metals and mining, semis and computers as sectors with potential for further margin expansion.