Top newsletters see market downturn

Andrew Leckey

February 24, 1993|By Andrew Leckey | Andrew Leckey,Tribune Media Services

The overachievers in the newsletter industry are taking a cautious attitude toward the rest of 1993.

"The investment-letter industry isn't terribly bullish right now," observes Mark Hulbert, editor of the Hulbert Financial Digest, which tracks the nation's investment letters. "While markets may actually do well in 1993, many editors have an eye on the exit."

Even before the recent volatility, tied to President Clinton's tax plans, a number of star editors were figuring a market correction into their forecasts. Not a dramatic descent, but a downturn all the same. This will accentuate their need to be judicious stock-pickers.

"Last year's trend toward secondary stocks should continue, but the market may be overheated in some areas," warns George Putnam, editor of the Turnaround Letter, whose model portfolio was up 63.40 percent over the past year as tracked by Hulbert, making it the nation's top performer. "I wouldn't be surprised to see a short-term correction."

Putnam, whose holdings in LSB Industries and Oak Industries had each tripled in price in the past year, believes there still are values in the depressed companies he targets. He considers energy stocks Wainoco Oil Co. and Energy Services to be particularly bargain-priced. Bankrupt R. H. Macy's 14 1/2 bonds due in 1998 are another good bet.

"A market correction of 5 to 7 percent is possible by summer because we've gone so long without a stiff correction," predicts Al Frank, editor of the Prudent Speculator, showing a 49.10 percent portfolio gain.

"On the bullish side, however, I'm positive about the overall decade because a Democrat administration tends to help secondary stocks, and low interest rates should be a plus."

Elated over his Western Digital stock tripling in price and his Chrysler Corp. shares more than doubling last year, Frank now recommends as three- to five-year choices Boeing Corp., the premier franchise in the aviation industry, and Seagate Technology. Fifty-five percent of his portfolio is margined, or bought with borrowed money.

"I would caution the investor that he's likely to see more market volatility this year than last year, even though the economy does give reason to be bullish," warns Gordon Anderson, editor of Individual Investor Special Situations Report, up 46.70 percent last year.

"Though stocks are the place to be, new investors must realize that stocks are not like bank accounts and that they must be able to ride the bumps."

One portfolio holding, cereal-maker Grist Mill, doubled in price in the past year, and Cheyenne Software, whose products are used in computer networks, tripled. Now Anderson is high on Micro Healthsystems in bedside computers and QVC Network, a home-shopping operation boasting a new chairman in Barry Diller from the Fox Network.

"The lesson from 1992, in which secondary stocks did well early on but didn't revive again until late in the year, is that it's difficult to time the market," says Hulbert. "Also keep in mind that many newsletters haven't been around long enough to have experienced a down market."

Downturns hurt some more than others. In the 1987 crash, the Prudent Speculator model portfolio plummeted 57 percent, while the Insiders newsletter portfolio that tracks trades of corporate insiders fell 29 percent. The Turnaround Letter, too new then to be tracked by Hulbert, also took a big hit.

Top-performing investment letter model portfolios over the past year, according to Hulbert, were:

* The Turnaround Letter, George Putnam editor, 225 Friend St., Boston, Mass. 02114, $195 subscription for 12 monthly issues, up 63.40 percent.

* The Prudent Speculator, Al Frank editor, P.O. Box 1767, Santa Monica, Calif. 90406-1767, $175 subscription for 12 monthly issues, up 49.10 percent.

* The Insiders, Norman Fosback editor, 3471 N. Federal Highway, Fort Lauderdale, Fla. 33306, $49 subscription for 12 monthly issues, up 47.10 percent.

* Individual Investor Special Situations Report, Gordon Anderson editor, 38 E. 29th St., New York, N.Y. 10016, $165 subscription for 12 monthly issues, up 46.70 percent.

* AgBiotech Stock Letter, James McCamant editor, P.O. Box 40460, Berkeley, Calif. 94704, $165 subscription for 12 monthly issues, up 36 percent.

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