Investments that let you get a night's sleep

July 27, 1994|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Sleepless in America.

As this year's volatile stock market continues to infect nervous investors with bad cases of insomnia, it's time to tuck some soothing investments under your pillow.

Such choices should help you snooze peacefully at night, because they represent reliable trends in energy, economic improvement and worldwide marketing.

Imagine the relief. No more staring at the ceiling all night, counting paper losses from this year's 20 percent decline of the average New York Stock Exchange stock from its 52-week high, or 30 percent decline of the average Nasdaq issue.

Although these selections are no prescription for excitement, they may be just what the doctor ordered for soothing jangled nerves:

* Citicorp, the largest banking company in the United States, whose earnings recovery should continue this year and next.

* Mobil Corp., the well-run oil giant that should profit from the rebound in oil prices.

* Kerr-McGee Corp., an exploration firm and developer of energy resources such as oil and natural gas, which also should benefit from stronger energy pricing.

* Dow Chemical Co., the manufacturer of chemicals, plastics, specialty items and household products, whose product cycle is on the upswing.

* Fleet Financial Group, a well-rounded holding company with banks in six Northeastern states and additional units in mortgage banking and consumer finance.

* General Electric Co., one of the world's largest, most diversified industrial companies, currently aided by strong growth in its appliance and plastics divisions.

* Procter & Gamble Co., the leading soap and detergent producer, which is gaining market share because of aggressive worldwide marketing and pricing.

Of course, nightmares can surface in any industry or company from time to time, but they're less likely with these examples.

Another interest-rate increase by the Federal Reserve is a foregone conclusion, and a lackluster market is expected by many.

Yet top Wall Street strategists see some opportunities.

"Stocks won't get killed, but it will be a tough market, and I see risk in fixed-income investments as the Clinton administration now takes steps to please voters rather than being pro-bond and deficit-cutting," predicted Greg Smith, chief portfolio strategist for Prudential Securities, who provided Kerr-McGee and Dow Chemical for our "sleepless" list.

Natural resources, capital spending, energy and technology will be new stock market leaders, Smith said.

He sees the Dow Jones industrial average 100 to 200 points lower by the end of the year. Recently, he switched his model portfolio to 60 percent stocks and 40 percent cash, eliminating bonds. Sticking with big firms, Smith admires Bethlehem Steel Corp., Caterpillar Inc. and Oracle Systems.

"The monetary environment will be negative, and we'll see reductions in 1995 earnings estimates," warned A. Marshall Acuff Jr., chief portfolio strategist at Smith Barney Shearson, who added GE and Procter & Gamble to our list.

Avoid areas in which long-term earnings growth is diminishing, and be conscious that profits often will be taken for profits' sake, he said. Expecting a 3,400 Dow between now and the end of the year, his mix is 50 percent stocks, 25 percent bonds and 25 percent cash.

Acuff prefers defensive choices in energy, utilities and natural gas, with the favorites being Panhandle Eastern, Consolidated Natural Gas and Bell Atlantic.

More optimistic is Abby Joseph Cohen, market strategist with Goldman Sachs, who added Citicorp to our list. Expecting a 4,200 Dow, she recommends 70 percent stocks, 25 percent bonds and 5 percent commodities.

"Inflation isn't a problem, for it will rise very slowly through next year," she said. "Corporate profits will grow at a 10 to 12 percent rate through 1995, and the dollar will be stable to rising the next six months."

Technology companies, interest-sensitive firms and cyclical companies should prosper, she believes. Her additional picks include Intel, Kaufman & Broad Home and Alcan Aluminum.

"With a worldwide down market, a weak dollar and the peak of the earnings momentum over, select individual stocks rather than sectors," advised Eric Miller, chief portfolio strategist with Donaldson, Lufkin & Jenrette, responsible for Mobil and Fleet Financial on the list.

Employing a portfolio mix of 50 percent stocks, 40 percent bonds and 10 percent cash, Miller also recommends Ford Motor, Ingersoll-Rand and Molex.

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