Market erasing bad effect of Black Monday

The Ticker

October 20, 1992|By Julius Westheimer

Partly erasing the bad memories of "Black Monday" five years ago, the Dow Jones industrial average climbed 14 points yesterday to close at 3,188.45. However, IBM stock continued to skid, dropping 5/8 of a point to 70 1/8 , a nine-year low.

LOOKING BACK: Should you have sold stocks of good, sound, seasoned companies after the 508-point crash of Oct. 19, 1987? Probably not. Although some stocks faltered -- American Express, Chrysler, IBM, Westinghouse, etc. -- others moved smartly ahead. Since "Black Monday," AT&T stock climbed from 21 to 42, Bristol Myers-Squibb moved up from 28 to 66, Coca-Cola from 7 to 41, BG&E advanced from 9 to 22, McCormick from 5 to 27, Merck shot up from 8 to 44, Philip Morris from 18 to 77 and Wal-Mart Stores zoomed from 10 to 60. (Current prices reflect last night's close, fractions dropped, and all prices are adjusted for splits.) Even the Dow Jones average vaulted from 1,738 to 3,188, an astonishing 83 percent five-year surge.

LOOKING AHEAD: But, you ask, what do we do now? What constitutes a "good, sound, seasoned company?" For the long pull, I suggest you consider buying (or holding) stocks of companies with these characteristics: aggressive, dynamic management (Schering Plough, Pfizer, General Electric, Nalco Chemical); big percentage of earnings into research and development leading to new products with high profit margins (Minnesota Mining, Merck); relatively low competition (public utilities); compound earnings growth of 10-12 percent a year (drugs and pharmaceuticals); and a demonstrated history of dividend increases through the years (American Home Products, Procter & Gamble, many utilities and food and beverage companies). Check your broker for lists of the above.

ANOTHER IDEA: "Relative bargains in bonds can be found right now in short-maturity debt or mutual funds that have short-term maturity objectives. Purchasing so-called prerefunded securities, for instance, you can get two-year, AAA-rated, tax-free bonds that have yields almost as great as the return on two-year Treasury notes. The taxable equivalent yield is at least half again that of Treasuries." (Ben Weberman, Forbes, Oct. 26)

BALTIMORE BEAT: Marvin Fribush, PaineWebber, will mail a 16-page booklet, "Retiring On Your Terms," if you phone him at 576-3220. ("New opportunities in stocks, bonds, etc., for investors already retired or nearing retirement.") . . . Call Rick Faby, Smith, Barney, 494-1853, for "Capital Markets Strategy." ("The amount of economic slack that is expected at the end of 1994 will be the same as when the recession ended. This is a 'disinflationary' environment, which is apt to persist for a while longer.") . . . Eastern Savings (Md.) is listed under "Top-Yielding Certificates of Deposit" in Kiplinger's Personal Finance Magazine, Nov., and T. Rowe Price Asia Fund appears under "Top-Performing Stock Mutual Funds: International & Global" in the same magazine. . . . "Corporate earnings will continue to disappoint investors. The stock market gained 30.5 percent in 1991, anticipating an earnings recovery that never occurred. Guys like me who buy stocks based on value think this is crazy." (Richard Fontaine, Richard Fontaine Associates, Baltimore)

MARYLAND & MORE: On the local front, Baltimore's Atlantic Federal Savings is listed under "Leading Car Loans in the Largest Metro Areas" in Money magazine, Oct. issue. In the same magazine, Bank of Baltimore appears under "Leading Home Equity Loans," First Advantage Mortgage is named under "Leading 30-Year Adjustable-Rate Mortgages" and GMAC Mortgage is under "Leading 30-Year Fixed Rate Mortgages." . . . National Business Employment Weekly, Oct. 16-22, on newsstands this week ($3.95 and worth it), runs a good story, "The Pros and Cons of Joining a Small Company." . . . "Three million people in the U.S. are homeless." (CBS News). I just figured out that 3 million homeless people would fill to capacity 66 Oriole Park at Camden Yards stadiums. . . . Business travel tip: "If you're trying to keep your weight down, avoid buffets. The inevitable temptation is to 'get your money's worth' by overeating." (Men's Health, Dec.) . . . "Do your travel expense reports while flying home. Otherwise you could wind up forgetting half of the expenses." (Same magazine) . . . "Loose talk spoils more careers than anything else." (Bits & Pieces) . . . "Stocks will move up, short term." (Martin Zweig) . . . "There's more 'down' potential than up." (William Gross) . . . "Stocks are not overvalued, this isn't like 1987, but I don't like IBM here. It's OK to buy Philip Morris, Merck and Bristol Myers." (Mary Farrell) Last three quotes from Friday's "Wall Street Week With Louis Rukeyser."

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