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Separatly
Top Financial News
Sat, 27 Feb 1999, 6:19pm EST
Financial, Energy Shares Poised to Rise This Year, Money Manager Says
Financial, Energy Stocks Seen Rising in 1999: Bloomberg Forum
Greenwood, South Carolina, Feb. 27 (Bloomberg) -- Financial
services and energy stocks, which have lagged other stocks in the
past year's rising market, are poised to be leaders in 1999,
South Carolina money manager William Harper said.
Stocks of banks, insurers and securities firms will be
boosted by higher revenue from a strong U.S. economy and lower
costs following mergers, said Harper, executive vice president of
Greenwood Capital Associates Inc. Energy stocks, meanwhile, are
likely to rise with a recovery in oil prices brought about as
economies in Southeast Asia rebound, he said.
Stocks in financial and energy sectors have been hurt in the
past year over concerns in emerging markets including Russia,
Asia and Latin America but now appear to be poised to rebound,
said Harper, whose firm manages about $1 billion in assets.
''Financial stocks are undervalued right now after being
pretty well hit last summer,'' Harper told the Bloomberg Forum.
''We see a lot of mergers and marriages'' that will boost
returns.
Among New York-financial services companies, Harper likes
prospects for Citigroup Inc., the result of the merger of
Travelers Group Inc. and Citicorp, and J.P. Morgan & Co. Both
stocks remain far below their highs of last spring, and profits
are expected to soar this year.
Harper, who's based in Greenwood, South Carolina, said
stocks of a number of U.S. banks with headquarters in the
Southeast are poised to rise.
CCB Financial Corp. in Durham, North Carolina, and Carolina
First Corp. in Greenville, South Carolina, have strong market
positions, growing earnings, and could be taken over eventually,
he said. Carolina First also is an Internet play, indirectly,
since it's the larger shareholder in Net.B@nk Inc., an Atlanta-
based Internet banking company.
BankAmerica
Another favorite is BankAmerica Corp. in Charlotte, North
Carolina. Chairman Hugh McColl, who recently committed to stay as
the top executive until at least 2002, is likely to succeed in
combining operations of BankAmerica and merger partner
NationsBank Corp., he said.
''BankAmerica has a fantastic future. They have potential
for a franchise with tremendous earnings power,'' Harper said.
Congress is likely to pass financial reforms that pave the
way for easier mergers among banks, insurers and securities
firms, which could provide a boost to the sector, he added.
The money manager particularly likes insurance stocks
because they are 10 years behind banks in consolidating, meaning
the stocks can gain from merger efficiencies and takeover
premiums. One favorite is Chubb Corp., a Warren, New Jersey-based
property and casualty insurer.
Securities Picks
Among securities firms, picks include Morgan Stanley Dean
Witter & Co. and Donaldson Lufkin & Jenrette Inc. Both firms are
poised to have higher profits, while their stocks sell at
discounts to most other stocks relative to their earnings, he
said.
Even if insurers and securities firms aren't taken over,
''we think they are undervalued right now. You have some downside
protection,'' he said.
Harper, who primarily invests in growth stocks, is avoiding
basic industry stocks such as steel, paper and chemicals. Even
though the U.S. economy remains strong, these companies have been
unable to raise prices to boost profits, he said.
Yet the decline in oil stocks has been overdone, he said.
While crude oil prices have plunged to about $12.50 a barrel, a
pickup in Asian economies by year's end will likely prompt a
rebound, he said. Favorites include Royal Dutch Petroleum Co., BP
Amoco Plc and Unocal Corp. among energy stocks and Schlumberger
Ltd. among oil-services stocks.
''Oil stocks are in a desperate mode right now,'' he said.
''They are cutting capital expenditures drastically. This will
eventually catch up with supply.''
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