For years, Forbes has been asking several of the nation's cagiest stock-pickers to kick off the new year's trading by naming their favorite issue. And for years it's been paying off. In 1988, for example, the expert picks rose 41 percent, more than doubling the general market's 19 percent gain. And in 1989 the selections jumped another 45 percent, again easily bettering the Dow's 28 percent run-up.
It didn't work in 1990, though. Last year the favorite stocks of the Forbes cognoscenti actually fell 5 percent, exactly matching the performance of the Dow. Still, five of the 12 selectors in the Forbes sweepstakes did manage to buck the trend, recommending stocks that rose an average 30 percent. All five have been rewarded for their perspicacity by being invited back for 1991's pick-one shootout.John Tauer of Minneapolis-based Piper, Jaffray & Hopwood led all Forbes' experts last year when his pick, Wholesale Club, rose 67 percent. This year he's putting all his chips on PHILIP MORRIS, citing its low price-earnings ratio, its dividend and earnings growth potential, and the $2 billion cash hoard it has available to make meaningful acquisitions.
Janus Capital President Thomas Bailey checked in second in the 1990 edition of the Forbes sweepstakes when his selection, Blockbuster Entertainment, gained 39 percent. This year, Bailey is letting it all ride on MID-AMERICAN WASTE SYSTEMS, whose growth over the next several years he believes will be dramatic and whose fundamentals he thinks compare favorably with the better-known names in its industry. "It's cheaper than Chambers Development or Waste Management and better run than Browning-Ferris," he says.
Brenda Lee Landy of Morgan Stanley used her selection of Gillette, and its subsequent 26 percent run-up, to nail down third place in Forbes' 1990 derby. For 1991, Landy is sticking with another big consumer issue, PROCTER & GAMBLE. She's impressed with the company's strong cash flow, clean balance sheet and the recession-resistant attributes of its products. "Even if oil prices rise again, P&G can pass on whatever price increases result," according to Landy.
Van Brady of Presidio Management is another of Forbes' successful quintet who is sticking with a market sector that was kind to him in 1990. Last year, Brady's favorite, Health Images, rose a respectable 15 percent. This year, Brady is tabbing another growing health-care stock, HEALTHDYNE, the nation's second-largest supplier of obstetrical home care. "It offers consumers a much lower cost alternative by keeping patients out of hospitals and treating them at home."
Finally, Byron Sanders, editor of The Speculator, whose pick, General Parcel Service, eked a 6 percent gain and earned him fifth place in Forbes' 1990 competition, is making another tiny growth company his choice this year. OMEGA HEALTH SYSTEMS operates eye-care clinics. Sanders sees its revenues rising to as much as $50 million in the next few years.
Next week: newcomer and short-sale selections.
(Forbes, 60 Fifth Ave., New York, NY 10011; biweekly; $52 annually.)
(Investor's Notebook reflects the opinions of professionals. It does not endorse specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.