Newspaper article THE JOURNAL RECORD

Big Investors Focus on Handful of Safe Stocks

Newspaper article THE JOURNAL RECORD

Big Investors Focus on Handful of Safe Stocks

Article excerpt

If Wall Street analysts start worrying about the stock market's health these days, a malady they often mention is "Favorite Fifty"


It's a condition that first flared up two decades ago, when money managers at investing institutions developed a powerful fondness for the shares of a few select growth companies.

When you bought into this elite group, the savants of the time declared, it mattered very little what price, no matter how high, you paid.

Since those companies, in an alphabetic range from Avon Products to Xerox, were growing rapidly in all kinds of financial weather, they were "one decision" stocks that need never be sold.

That notion was exploded in the big bad bear market of 1973-74, when the popular market averages suffered declines of 40 percent to 50 percent, and a typical member of the nifty fifty took an even bigger dive.

Now, in the early 1990s, some observers contend that a new generation of investors is venturing in the same direction.

"Today in a market dominated even more by institutions, we are seeing another gravitation to a handful of hot stocks," said Stephen Quickel in his newsletter U.S. Investment Report.

"Nobody is stupid enough to call them one-decision stocks in these more sophisticated times. But (price-earnings) multiples are soaring past 50 and still rising."

Added Kurt Feuerman, an analyst at Morgan Stanley & Co., "With interest rates low and real asset prices generally not rising, the only investment theme left is growth.

"The market's response has been to take the P-E multiples of the remaining growth stocks higher than at any time since the nifty-fifty period of the early 1970s."

Indeed, many analysts agree, the comparison is reinforced by the similarities between the economic environments of then and now. At the start of the '70s, as in the early '90s, the economy was struggling fitfully to recover from a recession that followed an era of financial exuberance. …

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