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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (5114)	8/24/1998 7:40:00 AM
From: BigKNY3	Read Replies (1) \| Respond to of 9523

How To Dodge Stock Market Turmoil ANDREW FRASER 08/23/98 AP Online Associated Press (Copyright 1998. The Associated Press. All Rights Reserved.) NEW YORK (AP) - Investors can still find some safety in the stock market despite recent market turmoil. Sure, the best bets in a declining market are Treasury bonds and money-market funds, which provide safety but lower returns. But the question still remains: Is a bear market on the horizon? A good defensive step, should that be the case, is to buy into companies or industry sectors likely to withstand current adverse conditions and to avoid those which can't. "The first thing is to know what the problem is that faces the market," says Hugh Johnson, chief investment officer at First Albany Corp., a regional brokerage firm in Albany, N.Y. "You want to put together a portfolio which is immunized from that worry." The Asian crisis, which has spread across the region like a bad case of influenza and sapped the economic life out of Japan and its neighbors, has been a significant factor in some of the recent turbulence in the U.S. stock market. The economic deterioration of Asia is crimping profits of U.S. companies that depend on export sales. Asian nations that once purchased billions of dollars in U.S. products, from soybeans to computers, have cut back sharply. And because many currencies have been sharply devalued relative to U.S. dollars, foreign goods sell cheaply in the United States, squeezing U.S. manufacturers by keeping them from raising prices and undercutting their sales. Investment advisers say the way to navigate a stock portfolio around that problem is to stick with companies that operate predominantly in the United States and aren't adversely impacted by Asia or the strong dollar on their overseas operations. Investors should concentrate on domestic stocks benefiting from the healthy U.S. economy - i.e. certain manufacturers of consumer goods. Another option is to buy into companies that stand to gain from Asia's maladies - such as retailers importing manufactured products from Asian countries at cheapened prices, who can turn them around at wider profit margins. Most general merchandise retailers import roughly 25 percent of their goods from Asia, according to Kurt Barnard, president of Barnard's Retail Trend Report, a retail forecaster in Upper Montclair, N.J. That opens many options in that category. But consumer-related stocks aren't totally immune from risk either, especially if the economy and financial markets deteriorate. That's because consumer spending - the main driver of the economy - has been fed by the wealth Americans have generated from the high- flying stock market. A fall in stocks could sap that wealth and consumers' spendthrift ways - deflating the economy and consumer stocks. "Many of these companies have had pretty good runs," notes Charles Pradilla, chief investment strategist at SG Cowen Securities Corp. in New York. "If the market starts to dawdle, I think you may start to erode a little of this very, very wealth-effect driven consumer demand." Pradilla advises investors to stick with companies whose profits are product-cycle driven during times of uncertainty. In simple parlance, those are companies that are riding the tide of a hot product. For example, Pfizer Inc. with its blockbuster impotency drug, Viagra. But even with Viagra, there might be other criteria to exclude a company like Pfizer from a portfolio of safe stocks. For example, Johnson points out, Pfizer's stock price relative to its earnings might put the company in the overvalued category, which could make it susceptible to a nasty downturn. "Drug stocks tend to be good defensive investments unless for one reason or the other they become pricey and overvalued," Johnson says. Companies whose stock valuations are considered excessively high should be avoided. A company whose earnings potential looks good but whose stock price already is trading at a premium might blow up in your face. Stick with companies that traditionally perform well in bad times if you prefer to avoid the headaches of playing around with numbers. Utility stocks, for example, are generally viewed as less volatile investments - stabilized in stormy markets by their high-dividend yield. Other sectors that historically do well when a profit recession is coming are stocks of non-cyclical industries such as food, insurance and drugs. They're not as directly affected by economic change. Remember: In a downturn, don't expect to match the returns during more bullish times. When taking a defensive strategy, you're really talking about finding stocks that go down less rather than those that will appreciate.