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Biotech / Medical : Pharma News Only (pfe,mrk,wla, sgp, ahp, bmy, lly) -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (591)	7/29/1998 6:17:00 PM
From: B.REVERE	Read Replies (1) \| Respond to of 1722

Forbes July 27, 1998 Market Trends Search the 1998 International 500 database Stocks for cowardly lions By Martin Sosnoff I'VE AWAKENED IN THE PREDAWN with this most bearish image. The symbolism is simple and stark-a sombrero. The S&P 500 touches down at 100 in the summer of 1982 (that's the left brim), climbs to 1100 (the peak) and then spends years descending gently back to the right brim of 100. Could it happen here? Reality in Japan and Korea and Hong Kong. But unthinkable here. The sombrero image bugs me, as evidence piles up that earnings for the S&P 500 are decelerating and may flatten out. Oil, technology and basic industrials are suffering margin contraction from pricing and weakening revenues. Southeast Asia does blow a cloud over our stock market, making earnings forecasts iffy for prime multinationals like Coca-Cola, 3M, Boeing. But there are powerful countervailing forces. The wealth effect that Alan Greenspan worries about, as he is paid to worry about inflation, looms as a huge stabilizing force for our domestic economy. The wealth effect explains the buoyancy of retail sales, homebuilding and the high plateau of auto volume. The wealth effect is the sustaining motive power. Try buying an apartment on Fifth Avenue or a Picasso at Sotheby's. You will be outbid by a dozen hands. There is a year's wait for the Mercedes sport utility vehicle, which is assembled down South. Everyone's complaining about escalating prices for airline tickets and the long lines for check-ins. AMR is still at 10 times forward 12-month earnings power, as few analysts have dared raise their numbers for 1999. The wealth effect that Alan Greenspan worries about looms as a huge stabilizing force for our domestic economy. Many of us are hiding in health care and financial services. Health care is impervious to the economic cycle, and the financials are at reasonable valuations compared with the S&P 500, but not, historically, bargains. I never thought I would be comfortable in a stock like Pfizer, at 40 times 1999's earnings, but I am. Wal-Mart's revenue growth line is so strong, the company is thinking of lowering prices further rather than increase gross margins. You pay for this in the market, but Wal-Mart is the Pfizer of retailing with a great three-year outlook. I'm not turning my back on Allstate, either. The analysts are afraid of Geico and State Farm going for share of market and driving down premium rates. This is happening, but Allstate is tough competition. I don't discount someone coming for them, either. It's just too cheap at 16 times present earnings. The media sector gets my money, too. What could be more xenophobic than the New York Times or cable television? You start with Time Warner and work your way through the content companies like Liberty Media, and to Murdoch's News Corp., which is dirt cheap. Murdoch's sale of TV Guide is a defining event that corrects an overpayment of at least a billion when he bought it from Walter Annenberg, who then bid for a lot of great contemporary art, including Picasso's "Au Lapin Agile." Murdoch has created the Fox TV network at a fraction of what Disney paid for ABC. The media moguls missed the renaissance in radio assets and the explosion of the Internet. It just proves there's no monopoly on brains. It's what the Justice Department is missing in the Microsoft situation. Microsoft is cheaper than Pfizer, and the market's just beginning to wake up to this, so MSFT makes my Cowardly Lion list of growth stocks. Sotto voce, I bought back America Online. If AT&T wanted it and Microsoft was interested, I'm in good company. The only way you trace out the sombrero formation is disappointing earnings for stocks like GE, Microsoft, Coca-Cola and Pfizer. But the odds of that happening aren't even close. That sombrero is just a bad dream. Forget it and enjoy the bull market. Martin Sosnoff is chief investment officer of Atalanta/Sosnoff Capital in New York and author of Silent Investor, Silent Loser.