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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: Joe S Pack who wrote (9744)	11/7/1997 1:53:00 AM
From: Mang Cheng	Read Replies (2) \| Respond to of 45548

From WSJ - the coms/usrx merger 'makes sense' : Dow Jones Newswires -- November 6, 1997 "Investment Strategists See S&P Above 1000 At End Of 1998" By Phyllis Plitch BOCA RATON, Fla. (Dow Jones)--Despite last week's unnerving tumble, two of three investment strategists who addressed Wall Street's main trade group Thursday continue to see moderate growth in the stock market. Speaking at the Securities Industry Association's annual meeting here, Gruntal & Co. chief investment strategist Joseph V. Battapaglia and PaineWebber Inc. chief investment strategist Edward Kerschner both described a scenario that has the S&P 500 index hitting at least 1000 by the end of next year. It closed Wednesday at 942. Kerschner focused in on 1010, while Battapaglia sees "1000 or better. That's the number we're using as well." The third investment strategist, Charles I. Clough, who chairs the investment policy committee at Merrill Lynch & Co., continued to pound the table on bonds and to advocate a portfolio allocated to reflect his unwavering fixed-income bullishness. Long-term treasury yields have been hovering around 6.25%. In a session he called "a couple of market strategists sitting around talking," Battapaglia didn't rule out the potential for continued volatility in equities, given the market's long bull run. Investors have to be ready for "blips," but he doesn't see the forces at work in the Oct. 27 stock market debacle as having a lasting impact. Kerschner also sees a relatively stable environment - "with rising earnings, low inflation and low interest rates" - for the stock market over the next year or so. He called the rout an overreaction. "It's hard to argue for a market correction greater than 10%, which we hit last week," he said. Clough declined to take a stab at predicting next year's stock market levels, but maintains the prospects for bonds are rosy. Long-term bond yields could dip as low as 5.5%, he said, even as low as 4.5% if a recession ever takes hold. Investors should try to capture the expected appreciation as yields go down. A recession isn't necessarily in the cards, however, and he expects to see a period of moderate growth. One of the main factors at work, according to Clough, is a capital surplus that will create deflationary pressure. The economy may be heading for "surprisingly low inflation and surprisingly low interest rates." Also, each investment strategist gave his take on the ongoing wave of corporate mergers. The combinations of NationsBank Corp. (NB) and Barnett Banks Inc. (BBI), Compaq Computer Inc. (CPQ) and Tandem Computers Inc. and 3Com Corp. (COMS) and U.S. Robotics Corp. make sense, said PaineWebber's Kerschner. U.S. Robotics, for example, lacks a presence in Europe and Asia, while 3Com has one. Kerschner also quipped, "with tongue firmly in cheek," that mergers he doesn't see working include Morgan Stanley Dean Witter, Discover & Co. (MWD) - a combination of Morgan Stanley and Dean Witter - and Smith Barney Inc.'s pending alliance with Salomon Inc. (SB). The strategist said he couldn't resist taking a friendly swipe at his brokerage colleagues. The newly minted company created by the merger of Bell Atlantic Corp. (BEL) and Nynex Corp. is among those on Gruntal's Battapaglia's A-list. On the negative side are attempts by traditional insurance companies to edge into the health maintenance organization business, he said. He cited Aetna Inc.'s (AET) purchase of U.S. Healthcare Inc. as an example. Merrill Lynch's Clough stuck by his fortune cookie-like adage: "He who shrinks their balance sheet the fastest wins," noting the improvements amid consolidation in the banking industry for one. As to whether investors can still find some solid values in equities, Kerschner believes one can find 15% returns in selected stocks. Kerschner is bullish on consumer-oriented companies, particularly those that serve 40-year-olds. Leisure, technology and entertainment lead the pack, he said. "I want to be there in a big way," he said, noting the likes of America Online Inc. (AOL) and Microsoft Corp. (MSFT). Kerschner would avoid commodities and equities linked to basic industries. Financial stocks, notably insurance companies, can still offer investor returns, said Clough, as can the airlines industry, which is poised to go through a business cycle "with much more stable earnings," he said. Battapaglia favors companies like Lucent Technologies Inc. (LU) and Motorola Inc. (MOT) and looks fondly upon financial service companies including asset managers, brokers and "even life insurance" companies. Finally, Battapaglia said his "favorite old dog of the Dow" is General Motors Corp. (GM). "This will be a global winner," he said, "and one of the best performing Dow stocks in the next 10 years." -By Phyllis Plitch; 201-938-5293