Market may plunge lower, Adams Express head says

Values of many firms still high, Ober warns, but no `debacle' seen

March 28, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

Despite the sharp drop in the stock market, the chairman of Adams Express Co., said yesterday that values of many companies still remain high and could fall even farther.

Douglas G. Ober, chairman and chief executive of the Baltimore investment company, told shareholders that the average Standard & Poor's 500 stock is still richly valued and trades at 22 times its earnings per share.

"The market could go substantially lower," said Ober, who spoke to shareholders at the Radisson Hotel at Cross Keys. "We don't expect an instantaneous recovery in the market."

After the meeting, Ober said the Dow could fall another 10 percent, or to about 8,900 points, but he doesn't expect a "debacle like we saw in 1973 and 1974."

One reason is that the economy should recover in the second half of the year as the Federal Reserve Board's three half-percentage- point interest rate cuts kick in, he told shareholders.

Despite the growing number of layoffs and warnings of weaker corporate profits, there are still signs that the economy is doing well, Ober said.

Retail sales are strong, as are housing starts, and unemployment and inflation remain at historically low levels.

"We believe that the recent Fed action should put us back on a reasonable track," he said. "We should see a modest recovery in the second half of this year."

Like many investment companies Adams Express struggled last year, but not as bad as the benchmarks.

After returning 33.6 percent in 1999, Adams returned a negative 4.3 percent on its investments in 2000, compared with the Dow Jones industrial average's negative 4.9 percent return and negative 9.1 percent return for the S&P 500.

This year, Adams has returned a negative 17.1 percent as of March 16. "We don't expect this to be the case for long," Ober said. "We expect our individual stocks within the portfolio to rebound."

Adams Express shares rose 49 cents yesterday to close at $17.95 on the New York Stock Exchange.

Adams is a closed-end fund that invests in stocks and other securities. Investors can buy into the portfolio by purchasing shares of Adams Express, which trade on the New York Stock Exchange.

Ober is also chairman and chief executive of Adams' sister fund, Petroleum & Resources Corp. The fund, which invests in energy companies, such as Exxon Mobil Corp. and Royal Dutch Petroleum Co., returned 33.1 percent last year, beating the Dow Jones Energy Index by nearly 9 percentage points.

As of March 16, Petroleum has returned a negative 5.1 percent since the year began, but Ober is upbeat about its prospects.

"We believe Petroleum & Resources will outperform the market again in 2001," he said.

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