There's not much fancy about the stocks our panel picked for '98. They're the kind that stick with you.
Ten years and one week after Black Monday and one day before the 68th anniversary of Black Thursday, October again showed why it is the cruelest month for the stock market. But BUSINESS NORTH CAROLINA's panel of investment pros are sticking with the 1998 picks they made before the Dow plunged 554 points in a single session.
"What has changed?" asks panelist Charles Patton, principal of Mimosa Investment Management. "Nothing. The fundamentals of the companies - if you picked good ones - are the same. Inflation remains low, the economy strong. Volatility only underscores the importance of investing for the long term."
This year that translated into fairly staid picks. Steel and coal, lumber and discount goods are not the most glamorous of products, but they were favorites of this panel. Steel giant Nucor Corp., power company Duke Energy Corp. and building-supplies retailer Lowe's Cos. were each chosen by two panelists. Discount retailers Cato Corp. and Family Dollar Stores also made the list.
Three retailers is a change from each of the previous three years, when only one retailer was picked. "Retail is alive," says panelist Gerry Smith, vice president of investments at Smith Barney. She picked Family Dollar as one of her three stocks. "Consumers are healthy and feeling good, and retail stocks are generally doing better."
Dick Austin, managing partner at J.C. Bradford & Co.'s Charlotte office, admits the once-troubled Cato isn't a particularly sexy choice. "Nobody's going to run around and say, 'Wow, I've got Cato stock!' But I think this year investors are looking at stocks that are coming out of the doldrums. They're looking at companies that have taken care of weaknesses and beefed themselves up, but the market hasn't responded yet."
That's true of Nucor and Lowe's, which some investors consider undervalued. Patton picked both. "Their prices are about the same as three years ago, but the companies are both bigger and stronger."
He knows what he's talking about. Each of the last two years, his picks generated the highest return. His 55% gain for the 12 months ending Oct. 20 beat the Dow Jones industrial average's 31%. That's on the heels of his 40% return the year before.
As a group, though, last year's pickers didn't fare well. Their return of 18% was well below the Dow and S&P 500. Only seven of the 19 picks finished above. Part of the blame falls on two high-tech choices. Telecommunications-software developer BroadBand Technologies Inc. dropped 60%. Glenayre Technologies Inc., a paging equipment maker, didn't fare much better, falling 26%. The only other high-tech pick, financial-software developer Broadway & Seymour Inc., dipped 2%.
Those records didn't scare off some pickers. Both Glenayre and Broadway & Seymour appear on this year's list. Patton is throwing his usual caution to the wind by choosing Glenayre. "I'm going out on a limb here." The stock, he says, "got way ahead of itself" in early 1996 but now is undervalued for its prospects.
Banks are another matter. Patton thinks they're too pricey and left them off his list. Others panelists disagree. They chose three banks: First Union Corp., NationsBank Corp. and CCB Financial Corp. Two picked CCB, in part because of speculation it might be [TABULAR DATA OMITTED] bought. The financial...