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To: Impristine who wrote (50920)	4/16/1999 4:35:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Cyclical stocks rally but some wonder for how long By Cal Mankowski NEW YORK, April 15 (Reuters) - Stocks of companies in cyclical industries such as paper and aluminum have rallied strongly this week but already some analysts are asking if they will be back in the doghouse before long. "Stocks such as papers and chemicals are more trading-oriented as opposed to long-term investment vehicles," said Edward Goldstein, a managing director with with the First Funds Growth and Income Fund. Goldstein said the shift into basic industry stocks may be more than a one or two-day phenomenon, but he would rather buy growth stocks that are reasonably priced such as certain financial stocks and consumer staples. "The trend appears to be away from large cap growth stocks," Hugh Johnson, chief investment officer at First Albany Corp said Thursday. Johnson said stocks sporting high price-to-earnings multiples, such as Pfizer Inc. <PFE.N>, Merck and Co Inc. <MRK.N>, Wal-Mart Stores Inc. <WMT.N> and Home Depot Inc. <HD.N>, are being sold and the money is being redployed into basic materials sectors including aluminum, chemicals, forest products, papers, building materials, heavy machinery and others. Other richly-valued stocks that have come in for selling include technology stalwarts Microsoft Corp. <MSFT.O> and Intel Corp. <INTC.O>. Johnson said it is too early to pronounce the rotation from growth to basic industry a meaningful event. "Basic materials stocks have performed poorly and are cheap while large cap growth stocks have performed well and are not cheap," he said. "It (the rotation) may be a search for value." Richard Cripps, chief market strategist at Legg Mason Wood Walker, noted that some of the stocks that have been sold have huge market capitalizations. Stocks being bought, such as Alcoa Inc. <AA.N>, do not rank among the top 50 in terms of market capitalization. Thus, he said, the money moving out of the big-cap growth stocks has an outsized impact on the stocks being bought. Asked why investors are making the shift now, Debra McNeill, portfolio manager of the Fremont Growth Fund, said one reason is anticipation of continuing improvement in the economies of Asia. In fact, she has been buying transportation stocks for her portfolio but in a measured way because she remains cautious overall. In other cyclical groups McNeill has been bumping up weightings in her portfolio by buying a few thousand shares here and there each month. She noted that for cyclicals generally, since the end of 1998 earnings forecasts have been revised slightly higher in many cases, unlike the negative revisions that were commonplace last year. "There has been kind of a stealth recovery going on in cyclicals that has been below most people's radar screen," said Matt Finn, manager of the Evergreen Large Cap Value Fund. He said a good example was Georgia-Pacific Corp <GP.N> which he was buying last year in the $40 dollar range. The stock has recently climbed into the $90 area. Stocks of some cyclicals may have further upside of only 10 to 20 percent, Finn said, and thus he advised a stock-by-stock approach. Johnson said that with many cyclicals benefiting from stronger pricing, the flip side of the situation will be that the Federal Reserve will be keeping a close eye on the situation. Always concerned about a return of inflation, "the Fed will have its work cut out for it," he said. Several managers said that they did not think inflation and the possibility of higher rates was a major concern right now. "I think there is plenty of global capacity and we're in a global economic environment," Goldstein said. "In our opinion, there is enough capacity so that that (inflation) wouldn't be a problem," McNeill said.