A buying panic or 'catch-up ball?'



The buying panic continued on Wall Street yesterday as the Dow Jones industrial average surged 33.89 points and closed at a record 4,303.98. But as one local broker put it, "Let's not get carried away; we're just playing 'catch-up ball' after last year's miserable showing."

In less than four months since New Year's Day, the Dow has climbed 469 points, or 12 percent, above its Jan. 1 level of 3,834.44.

PICKING WINNERS: "Small-capitalization stocks rise at a rate consistently faster than other types of investment," says Marcus Robbins, president, Red Chip Review, a research service that analyzes 300 "small-cap" companies.

He adds, "I pick winners by the 20-20 rule, namely, a small-cap company must have at least 20 percent earnings growth, 20 percent return on equity, 20 percent ownership stake by insiders, no more than 20 percent ownership stake by institutions and a stock price less than 20 times earnings."

Mr. Robbins' 15-stock portfolio had a 24 percent return in 1994 vs. 1.3 percent for the S&P 500-stock index. His present selections are Pacific Rehabilitation & Sports Medicine, Labor Ready and Penwest Ltd. (A company is considered "small-cap" when the value of its stock is less than $750 million.)

MATH CLASS: "To find out how much tax-free income is worth to you, divide the yield from a tax-free bond by 1 minus your tax bracket. That shows how much you'd have to earn from a taxable investment to get the same after-tax return as from the tax-free one.

Example: If a tax-free bond pays 4 percent and you're in the 31 percent bracket, divide 4 percent by 0.69 (which is 1 minus 0.31). The result is 5.79 percent. So a taxable investment must pay more than 5.79 percent to give you more after-tax income than the tax-free bond." ("Winning in Mutual Funds" by Jay Schabacker, Gaithersburg.)

MONEY MATTERS: "Don't book airline tickets immediately after discounts are announced. Reason: It may take a few days for other airlines to respond to a fare war, so you may be able to fly on your preferred carrier if you wait. Bonus; The followers may lower their fares even more." (Consumer Reports Travel Letter.)

In response to many requests, we reprint figures from Money magazine, April: "If you put $25 a week into stocks that gain 10 percent a year (or just under the 10.2 percent average annual return for stocks over the past 69 years), you'll have more than $103,000 in 22 years."

"Tax-adjusted yields on five-year tax-free municipal bonds now outperform even 30-year Treasury issues." (Smart Money, May.)

TIME-SAVERS: "Some tips for saving your valuable time: Put a timer on your voice mail; restrict messages to 30 seconds. . . . Don't let E-mail derail you; turn off the sound device and check in only twice daily -- when you arrive and again in mid-afternoon. . . . Set clear agendas; before the start of every meeting, ask: 'What are we here to accomplish and how long will it take?' . . . Consider planning software, such as ACT! (Symantec, $185). Computerizing your calendar, Rolodex and note pad will greatly increase your efficiency on and off the job." ("Time Management For Dummies," by Jeffrey Mayer, $16.)

JUST FOR ME? Under "The Leading Borrowing Deals Near You," Money magazine, May, leads page 55 as follows: "Dear Julius Westheimer, Here Are The Leading Borrowing Deals in Baltimore. Fixed-Rate 30-Year Loan: National City Mrtg (410-573-5757); One-Year Adjustable: First National Mrtg. (800-624-6616); Home Equity Line: Bank of Baltimore [First Fidelity] (410-244-3360); Car Loan: American National Savings (410-752-0400.")

BALTIMORE BEAT: T. Rowe Price Science & Technology Fund is listed under "Top-Performing Specialty Funds" in Money, May. (Data from Morningstar.)

Baltimore stocks ranked No. 7 in the country for first-quarter performance, gaining 9.9 percent, according to the "Money Nordby Cities Index." Best city stock performance was Miami, up 12.7 percent; worst was Tampa, down 0.9 percent.

"Sun Stocks" reaching 12-month highs recently include Aegon Insurance, Black & Decker (up 76 percent from its 12-month low), CSX Corp., Giant Food, HCIA, Inc., Loyola Capital and Provident Bank.

PaineWebber's Marvin Fribush will mail you his firm's "Municipal Bond Strategies for Tax-Conscious Investors" if you call him at 576-3220.

On Wednesday, May 10, at the Hyatt Hotel at noon, Baltimore Security Analysts' present Fred D'Alessio, president of Consumer Services Division, Bell Atlantic.

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