Despite likely correction, a stock-picker is upbeat

Andrew Leckey

September 29, 1993|By Andrew Leckey | Andrew Leckey,Tribune Media Services

There will be a stock market correction, but not everyone is worried sick about it.

"You're going to have corrections and greater volatility, but I still like the stock market a lot over the next 10 years," said Richard Strong, chairman of Milwaukee's Strong/Corneliuson Capital Management. "Stock-pickers were out of vogue the past 10 years, but we're now in a stock-pickers' environment, and that's perfect for us."

Strong, an imposing man whose steel-gray hair exactly matched his gray suit and striped tie, is more than just a stock-picker.

A son of self-sufficient North Dakota farmers, he grew up reading the Landmark Book series on great industrialists like Cyrus McCormick and how they started businesses. He dabbled in stocks during college and, in 1974, got a chance to start his own business.

Strong, 51, now runs one of the nation's most respected mutual fund companies, a company that bears his name and has 17 funds and $6.3 billion in assets. Its staff has been expanded since 1989, when a six-month stretch of poor performance resulted, he said, from managers being stretched too thin.

His 35-member investment department includes portfolio managers snared from Salomon Brothers, Kemper Financial and Stein Roe & Farnham. Most grew up in the Midwest.

"As money flows from the banking system into mutual funds, we'll see more volatility, for it's easy to sell, and money can really fly," Strong said.

"The move to longer-duration investing -- rather than saving -- is like moving further out onto a tree branch, for as the tree moves, the branch swerves around more and creates greater volatility."

Strong's credibility is based on performance. This year, Strong International Stock Fund is up 24.7 percent, Strong Total Return Fund 17.7 percent, Strong Common Stock Fund (currently closed to new investors) 16.2 percent, Strong Opportunity Fund 15.1 percent and Strong Income Fund 14.3 percent.

The blind trust in which President Clinton's personal investments were placed after he took office keeps part of the president's individual retirement account money in Strong Opportunity Fund.

Besides direct sales of Strong no-load funds, they are available with no fees through the Charles Schwab and Fidelity Investments discount brokerages. Profits that Strong derives from this arrangement are earmarked for computers.

Here's Strong's scenario:

* Extensive world competition will provide opportunities. Leaving soon for his third visit to China, Strong will initiate the Strong China Fund by year-end.

* Inflation will be lower because of pressure from international competition.

* Interest rates will be lower, with no big increases for a long time.

* There will be a shift away from the consumer and drug stocks that fueled the market in the 1980s and toward companies with the greatest efficiencies in their fields.

Strong can offer up a flood of investment picks. Banking should show steady improvement, he believes, with the best stock choices being Citicorp, Chemical Bank, First Chicago Corp. and First Interstate Bancorp. First USA is a no-fee, low-rate credit-card company he likes.

Supplemental health insurance should prosper as the population ages and Clinton programs kick into gear, with Aon Corp., PennCorp Financial and Torchmark Corp. his picks.

As money migrates to more sophisticated investments, the brokerage industry will benefit. He prefers Salomon Inc., Morgan Stanley, Merrill Lynch and Charles Schwab. In stocks of mutual fund firms, he recommends T. Rowe Price and Franklin Resources.

Advanced fiber-optics technology will be a boon to communications companies, so Strong sees solid prospects in stocks of AT&T, MCI Communications and Sprint. Among cable companies, he likes Tele-Communications, Comcast and Century Communications.

Auto companies will gain momentum. He would buy Ford, General Motors and Chrysler. Nucor Corp., an efficient growth company in the steel industry, is worthy of investment, he added.

"America's still great," Strong said. "One reason it's getting better is that a job is considered more valuable today because it's harder to get."

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