In the 1990s, investors will have to choose their stocks more carefully then they did in the 1980s, says a top Baltimore investment banker.
"The '90s are going to be much more difficult," says Robert S. Killebrew Jr., chairman of the investment committee at the Alex. Brown & Sons investment banking firm.
Instead of relying on the general upward trend of the market, investors will have to buy stocks of companies with good earnings potential, says Killebrew, who is also a managing director of the 191-year old firm.
Killebrew was the main speaker yesterday at Alex. Brown's third annual seminar for its clients.
This year's session was entitled "Wealth: Preservation and Growth in an Uncertain Economy."
Showing a slide of a jaguar attacking an antelope, Killebrew said the economy is becoming more Darwinistic with the fittest companies surviving. "You better find the jaguars of the world and move out of the antelopes," he said.
Killebrew also said the stock market indexes consistently increase an average of 10 percent annually, despite fluctuations. The key to successful investing is "the stubborn holding [of the stock] of very good companies," Killebrew said.
Like other observers of the economy, he expects the recovery to be "slow and steady" and not to spring back as it has after other recessions. Reasons range from the high amount of debt held by businesses and consumers to falling consumer confidence, resulting in sagging retail sales.
Killebrew also partially blamed the media for "talking ourselves into a depression" by putting the worst slants on economic news. He cited recent press reports that the stock market plummeted 120 points instead of saying the drop amounted to only 4 percent of the market.
Good signs for the economy include the spread of capitalism in former communist countries, baby-boomers saving more and the end of the overbuilding of commercial real estate, Killebrew said.