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To: Sig who wrote (10192)	12/21/2002 4:32:38 PM
From: stockman_scott	Respond to of 13815

An Excerpt From The New Money Magazine Cover Story... Money January, 2003 SECTION: COVER STORY; Pg. 68 HEADLINE: Best Investments (2003); AFTER THREE DARK YEARS, WE CAN SEE DAYLIGHT. REGARDLESS OF WALL STREET'S WHIMS, OUR 10 PICKS FOR 2003--SEVEN STOCKS AND THREE FUNDS--WILL BRIGHTEN YOUR PORTFOLIO FOR YEARS TO COME. BYLINE: Aravind Adiga, Jon Birger, Jeff Nash, Nick Pachetti, Ilana Polyak, Stephanie D. Smith and Cybele Weisser <<...As bear markets go, this one is rewriting the rule book. Large-cap stocks have been mauled worse than small-caps, and corporations are running scared while consumers keep the economy afloat--both the opposite of what usually happens. Conventional wisdom has never been more worthless, which is why a conventional recovery seems so unlikely. At least that was the premise the editors and writers of MONEY started with when we set out to assemble our list of the best investments for 2003. When you read through our picks you'll notice, for example, our list's strong large-cap bias--a bias that contradicts a long history of small stocks recovering first from bear markets. The way we see it, large companies got us into this mess; they should be able to lead us out. Overall we expect 2003 to be a solid year for stocks. The problem right now is that corporate chieftains are too nervous to spend money on new personnel or equipment. "Deep pockets but short arms" is how one prominent CEO describes the predicament. "The stock market is the key to the confidence of senior management," echoes Mark Zandi, chief economist at Economy.com. CEOs, Zandi says, won't take big risks until the market rewards them for doing so. That's the reason the fourth-quarter rally bodes so well. That said, our picks for 2003 are more conservative than our overall optimism might dictate. Going out on a limb seems unwise given the market's extreme unpredictability. So after crunching numbers and interviewing scores of analysts, economists and money managers, we homed in on seven stocks that not only are well positioned for an economic recovery but also offer downside protection if it doesn't materialize. Call it a portfolio for the cautiously optimistic. The combined average yield of our seven stocks is an above-average 2.1% vs. 1.7% for the S&P 500, with the potential for higher payouts should Republicans follow through on promises of dividend-friendly tax reform. They're also quite cheap relative to their anticipated growth rates, with an average PEG ratio (price/earnings ratio divided by projected earnings growth) of 1.6 vs. 2.5 for the S&P. Now on to the stocks, which are presented alphabetically. DELL COMPUTER (DELL) To understand why we're bullish on Dell's prospects for 2003, first consider what the world's leading computer maker just accomplished. In 2002, a year described by tech tracker IDC as "the worst ever" for the IT industry, Dell widened its profit margins and improved revenue per employee. For 2002 it's on pace to grow profits by 23%. If Dell could do all that in a year when global technology expenditures actually declined--by 2.3%, according to IDC--imagine what it might do when the industry is actually growing. A whole lot, in our opinion. That's why we think Dell is so well positioned. Desktops and servers usually become obsolete or costly to maintain after three to five years. With so much of corporate America's computer hardware purchased in the two years leading up to Y2K, a burst of new IT spending is both inevitable and overdue. Ned Riley, chief investment officer of State Street Global Advisors, is so optimistic about Dell's prospects for 2003 that he thinks the 24% earnings growth that analysts are predicting is too conservative. "Most of today's forecasts reflect three years of accumulated negativity," Riley contends. Yes, Dell's P/E ratio is high--at $ 29 a share, Dell trades at 29 times next year's estimated earnings--but we'd argue that Dell's marketing and cost advantages make it one of the safer ways to bet on a tech resurgence. Rain or shine, Dell continues to steal market share from rivals like Gateway and Sun Microsystems. Says founder and CEO Michael Dell: "Our growth plans are not contingent upon a broad recovery in the technology market." Consider Dell's cagey move into the printer business. "If Dell is aggressive in the way it prices printers and cartridges, it's going to put pressure on Hewlett-Packard to respond in kind," says Charles Wolf, a Needham & Co. analyst who counts Dell as his top pick. "And that in turn will weaken HP's ability to compete in PCs and servers." Another positive is Michael Dell's sudden open-mindedness on the subject of dividends. Despite its $ 9 billion in cash and liquid investments, Dell has long resisted paying a dividend, using excess cash for stock buybacks instead. But with Congress talking about easing the personal tax on dividends, Michael Dell tells MONEY that he'll "absolutely consider a dividend" if Congress acts--something he'd like to see happen...>> Copyright 2003 Time Inc.