Analysts predict top stocks will be more than dot.coms

Personal Finance

January 02, 2000|By Eileen Ambrose

A FEW DAYS ago, the way to get rich in the stock market was to buy one of the hot dot.com companies and ride the Internet euphoria.

But that's so 1990s.

Investment experts predict a broadening of the market in 2000, when industries besides technology will play a role in fueling the bull market. Medicare reform, newfound wealth, an aging population as well as a growing number of teen-agers are some factors that will cause investors to consider stocks they've been neglecting, said market experts.

Among the pros' picks of what's hot and what's not for 2000 and a few years beyond:

Technology will continue to flourish, but not across the board. Businesses that will do well are those that help others with technology infrastructure or with launching and maintaining an Internet presence, predicted Chuck Carlson, editor of the DRIP Investor newsletter in Hammond, Ind.

That includes telecommunications equipment companies, such as Lucent Technologies; and Internet systems companies, such as Cisco Systems Inc. and Sun Microsystems, Carlson said.

Also, software companies, such as Oracle Corp., that make products to help other businesses manage their data should do well in the coming years, Carlson said.

On the downside, Internet retailers, including Amazon.com Inc., may see their stock prices soften as competition heats up and sales slow, experts predict.

High-fliers such as Qualcomm Inc., which topped $700 last week, and Internet media company Yahoo! Inc., trading above $400, may come down from the stratosphere, some experts predict. (Before Qualcomm's 4-for-1 stock split Thursday, a PaineWebber Inc. analyst predicted that the digital cell-phone technology developer would hit $1,000 a share within 12 months.)

"These things just can't go up forever," said Morry Zolet, senior vice president of investment at Ferris, Baker Watts Inc. in Baltimore. Zolet, however, isn't predicting a long-term retreat, but rather a drop long enough for investors to jump in at more affordable prices.

Financial services stocks weren't helped last year with three rate increases by the Federal Reserve. More rate boosts may occur this year. But market experts say these stocks have other factors in their favor. More people view stocks as their ticket to retirement and individuals who have grown wealthy through equities, at least on paper, need help managing their investments, experts said.

"Investing has surpassed baseball as the national pastime," said Alan Skrainka, chief market strategist with Edward Jones in St. Louis. Skrainka favors American Express and Wells Fargo, which is a major player in states with fast-growing populations.

Debate on Medicare reform, talk of price controls on prescription drugs and increased government scrutiny of hospitals and managed care companies have dampened health care and pharmaceutical stocks, experts said. Still, with an aging population, the prospect for drug company stocks is strong, they said.

"It's a lot cheaper to take a pill than check yourself into a hospital," said Skrainka, who predicts that the federal government will continue approving about 100 new drugs a year.

Companies likely to gain from this trend include Bristol-Myers Squibb Co., Schering-Plough, Abbott Laboratories and Merck & Co., market experts predict.

Biotechnology doesn't have the threat of price controls and will continue to build on gains it made this year, said Rick Jandrain, director of equities securities for Banc One Investment advisers in Columbus, Ohio.

Extensive cancer, HIV and gene therapy research now under way will yield many new products in years to come, boosting biotech stocks' long-term prospects, said Patrick Buttarazzi, a financial adviser with Prudential Securities Inc. in Baltimore.

"Anything with gene attached to it may be considered as dot.com a few years down the road," said Buttarazzi.

"This is not for the faint of heart," he added, noting that the stocks will be volatile as investors push up prices.

Americans are getting older, but not without a fight. As more join the middle-age ranks, "they realize they have to take better care of themselves and eat healthier," said David Wanetick, author of the book "Hot Sector Investing: Profit From Over 100 Emerging Opportunities." That's good news, he said, for the stock prices of natural-food producers and retailers, including Wild Oats and Whole Foods Market, which owns Fresh Fields in Baltimore.

Just as baby boomers are getting older, so are their children. In 1997, there were 25 million teens. In six years, the number is expected to exceed 30 million. Companies poised to benefit from the trend are apparel retailers such as Hot Topic Inc., Gadzooks Inc. and Claire's Stores, Wanetick predicted.

Industries with little growth potential are agriculture and heavy manufacturing, which will continue to shrink as a portion of the economy, Skrainka said. Banc One's Jandrain said telephone utilities may also lag as they spend enormous amounts to build up their networks. "There's a lot of competition there. Regionals are getting into long distance. Everybody's getting into each other's markets," he said. "Usually in those cases, there are more losers than winners."

Eileen Ambrose can be contacted at 410-332-6984 or by e-mail at eileen.ambrose @baltsun.com.

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