Small-Growth Stocks Should Enjoy Boost under Clinton

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Wall Street investors who favor small-company growth stocks hope they have found a new friend in high places.

If President-elect Bill Clinton's ideas and policies take the shape these analysts expect, they envisage a renewed period of prosperity for that distinctive sector of the stock market.

"Look to small-cap growth stocks after the election," urged Stephen Leeb in his investment advisory letter The Big Picture.

"The market's big message is `buy small,' " declared Ralph Acampora, technical analyst at Prudential Securities.

After a long dry spell in the '80s, the emerging or "junior" growth stocks came to life in 1991 with a rally that far outstripped the gains recorded by the big-name blue chip and cyclical industrial stocks.

By last spring, the small-growth stocks suffered a sharp setback, faced with a surfeit of new public offerings from little companies with big ambitions.

In recent weeks, however, emerging growth indexes have perked up again, energized in part by the developing success of Clinton's campaign.

"In his national economic strategy program," noted analysts at Merrill Lynch, "the new president proposed to provide a targeted investment tax credit, a 50 percent tax exclusion to help small businesses, and a permanent research and development tax credit.

"These proposals suggest that small and midcapitalization stocks should be a part of an investment focus."

Politics aside, emerging-growth analysts say the group still has a lot of catching-up room after its laggard performance all through the bull market of the 1980s.

As of Sept. 30, the price-earnings ratio of the T. Rowe Price New Horizons Fund, long considered a representative sample of emerging-growth stocks, stood at just 1.06 times the PE of Standard Poor's 500-stock composite index.

By tradition, emerging growth stocks are a buy when their relative PE is near parity with the overall market, as measured by the S P 500. …

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