Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 2, 1993 TAG: 9307020359
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
Most of the companies, which were listed in the Jan. 3 issue of the Roanoke Times & World-News, showed major gains and losses through the close of business Wednesday. The newspaper had asked the four brokerage houses to recommend stocks with potential for appreciation this year.
Only one portfolio, prepared by Dominion Trust Co. of First Union Capital Management Group, beat the Standard and Poor's index of 500 stocks. Two of them actually lost money.
Perhaps not coincidentally, the Dominion Trust portfolio contained eight companies, compared to six in each of the others.
Steve Bowery of Dominion Trust said 1993 so far "has provided some real surprises and lessons for both amateur and professional investors."
Here are some of his lessons for for people who follow the stock market:
Advantages of diversification show clearly. In every portfolio, at least one stock declined more than 10 percent.
Bowery said First Union Capital Management generally selects at least 30 stocks in a portfolio.
"Statistically, it has been shown that at least 15 stocks, diversified among different industry groups, are necessary to provide minimum diversification."
He advised investors, regardless of their financial knowledge, to use mutual funds unless they can afford to invest in 15 or more stocks.
Although the market overall has gained modestly so far this year, numerous giants have been slain. Companies such as Philip Morris, IBM, Tambrands, Bristol Myers-Squibb, Kimberly Clark and Kellogg experienced significant declines.
"The stock market changes personality in a major way from time to time," he said. "We are witnessing a major rotation from consumer growth companies into more economically sensitive areas such as capital goods."
Investors are more sensitive than in the past to corporate earnings reports. Companies announcing earnings below expectations have "been taken behind the barn and shot."
Political events, always a factor in the stock market, are even more significant as Washington struggles with health care, taxes and budget deficits.
Meanwhile, the chief investment strategist for Wheat, First Securities predicted the start of a third phase of the current bull market after the July 4 holiday.
Don R. Hays of Richmond advised investors to get off the sidelines and into the market as rapidly as possible. He favors aggressive purchase of small capital-growth stocks.
Hays said he expects companies to report better-then-expected earnings for the second quarter when the results are published next month, kicking off a new upward spiral.
From an international viewpoint, he said, France lowered interest rates for seven consecutive weeks and Germany recently followed suit. And he anticipates good results from the economic stimulus being applied in Japan.
He forecast that the Dow Jones Industrials will top the 4000 mark when the third phase culminates in February or March.
\ A.G. EDWARDS & SONS\ Emerson Electric: up 5.91%\ Merck & Co.: down 18.16%\ Philip Morris Co.: down 37.44%\ Chevron: up 26.26%\ Dominion Resources: up 12.66%\ Clear Channel Communications: up 28.83%\ AVERAGE: UP 3.01%
\ J.C. BRADFORD\ SouthTrust Corp.: up 15.03%\ Manor Care: down 15.51%\ Shoney's: down 20.43%\ Medaphis Corp.: down 17.99%\ Sports & Recreation: down 10.40%\ Michaels Stores: down 9.93%\ AVERAGE: DOWN 9.87%
\ SCOTT & STRINGFELLOW\ Central Fidelity Banks Inc.: up 6.25%\ Hilb, Rogal & Hamilton Co.: down 13.60%\ Owens & Minor: down 6.22%\ Smithfield Foods Inc.: down 11.18%\ United Dominion Realty Trust: up 6.93%\ Universal Corp.: down 27.84%\ AVERAGE: DOWN 7.61%
\ DOMINION TRUST CO.\ American International Group: up 11.21%\ Bank of New York: up 10.21%\ Becton, Dickinson: up 1.75% Brown-Forman Corp.: up 5.91%\ Hong Kong Telecommunications: up 13.22%\ Kmart: down 14.29%\ Lukens Inc.: up 11.87%\ SuperValu Inc.: up 8.03%\ AVERAGE: UP 6.00%
Memo: ***CORRECTION***