Buying small-company stocks and buying them now is the ticket to investing in a recession-strapped economy, a panel of three Baltimore investment managers told the Baltimore Security Analysts Society.
"As we proceed into 1991, don't wait for the news to be favorable," said J. Dorsey Brown of Alex. Brown Investment Management, one of three speakers at the midday forum held yesterday at the Tremont Plaza Hotel in downtown Baltimore. "If you wait for the news to be favorable, it will be too late."
The securities business has stumbled in recent years as the waning of the 1980s stock-market boom has slowed demand for stocks. The industry has been selling hard the idea that the best time to buy any asset -- including stocks -- is when markets are depressed and once-overpriced stocks have been humbled back to bargain levels.
"Stock prices tend to rise during a recession -- not after a recession," said Craig Lewis of Investment Counselors of Maryland, pointing to the bullish markets of 1974 and late 1982 as examples.
He thinks the current recession will be fairly short, in part because manufacturers went into the recession with fairly lean inventories and were quick to cut back production before consumer demand softened.
Mr. Lewis said that stocks of large companies that trade at high price-to-earnings multiples were the big winners in 1990, a trend he thinks will change this year.
"A lot of value has been built up in smaller companies over the last two years," he said, adding that he advises avoiding the higher-priced stocks of bigger companies that led 1990's market and concentrating on cyclical companies whose businesses tend to recover from downturns quickly.
He said he is bearish on long-term bonds because of persistent inflation, and is also low on stocks of financial, energy and consumer drug companies.
Stanford Z. Rothschild Jr. of Rothschild Co. said he is concerned about the prospects for a longer-than-expected war in the Persian Gulf, and about the impact of the conflict on post-war Arab politics.
He added that he is making some offshore investments as hedges against the possible impact of the sustained federal government deficit and U.S. inflation.