Mike, these are the real contrarians - they buy (for other people's money) stocks 10% off last high -g-
<<CONTRARIANS: THIS IS THE TIME TO BUY
By BETH PISKORA
It would be foolish not to rush in to snap up bargains in today's market, say contrarian strategists. After all, the major market indices are more than 10 percent lower than their highs, and many stocks have suffered even greater losses.
While it takes a strong stomach to make big bets when the market is steadily moving south, it is a strategy that can pay off well in the long term, say strategists. You have to be a contrarian in this market, said TonySpare, chief investment officer at Spare, Kaplan, Bischel & Associates. After all, the average U.S. stock is already 20 to 30 percent lower than its all-time high. More than 50 percent of the stocks listed on the New York Stock Exchange have lost 25 percent of their value in the last month.
So where are the good values? Strategists unanimously agree that telecommunications companies offer the best bargains today. Telecommunications still looks good, in part because they hadn't run up as much as some of the other high flyers, said Spare. GTE is down 17 percent from its high, for example. But the baby bells are not just cheap - they have real value. They have consistent revenue growth and they keep introducing new products and services. Bell Atlantic is another good choice, as it trades in the mid-40s, well below the high of 521332 it achieved early in the summer.
There is also strong agreement about values in consumer product companies, though not the Coca-Colas or Procter & Gambles that are usually such favorites with investors. Instead, strategists recommend companies like Bestfoods, the name behind Hellmann's mayonnaise and Skippy peanut butter, and Sherwin-Williams. Sherwin-Williams is about 30 percent lower than its all-time high, even as home remodeling has become one of America's hottest pastimes. What's more, the company has strong management, good steady earnings, and growing revenues. Bestfoods is only 12 percent lower than its high, but represents good value nonetheless, according to analysts as Goldman Sachs, Warburg Pincus Read and Schroder & Co., all of whom posted buy ratings on it this week.
We're looking for good quality companies with recognizable brand names that have watched their stock go down just because of the overall weakness in the market but not because of any earnings shortfall or anything company-specific, said Linda Bannister, analyst with Edward Jones & Co. Her search has taken her to Johnson Controls, which makes automotive systems, and Carnival, the cruise line operator. These are great values, she said. We had Johnson on our model portfolio list when it was trading in the 60s, but it's an even better buy at 45.
Other stocks that have been looking like bargains in the past week include little-known Crane Co., which makes valves, pumps, brake control, and anti-skid systems. This member of the S&P 500 is down 24 percent from its high. Other S&P 500 components that offer good value and strong growth prospects, according to strategists, are Mattel, the toy manufacturer; MBNA, the credit card lender; Service Corp. International, a funeral firm; and SLM Holding, the student loan organization that spun off from government-run Sallie Mae last year.
Buy good, solid, profitable companies with good growth prospects, said Richard Schmidt, editor of Stellar Stock Report, a top-rated newsletter. Stay away from the companies that are still overvalued even though they've come down in price. That warning precludes buying many of the hot bellwether technology stocks. Intel, for example, is trading 30 percent lower than its all-time high. But it's still very expensive by just about any valuation measure, said Spare. He also recommends staying away from the 30 stocks that make up the Dow Jones industrial average, and buying companies with lower market capitalizations. >> |
