"We're not worried about corporate profits," says The Wall Street Generalist (1266 First St., Suite 6, Sarasota, FL 34236). "Not when we see dramatic monetary easing moves taking place that will affect future earnings more than any other factor. The key point to watch for here is a Fed funds rate of 63/4 percent. That amount of reduction in the past has almost unfailingly caused dynamic bull markets to unfold."
- Better Investing magazine is published by the National Association of Investors Corp., the umbrella organization for hundreds of investment clubs nationwide. Better Investing's model portfolio is an ideal place to look for stocks that are coming into favor with the average investor. B.I.'s model portfolio stresses companies with excellent growth potential and sound financial characteristics. Its current composition: Boeing, Carter-Wallace, Danaker, Dow Chemical, Hershey Foods, Ionics, Mallard Coach, Melville Corp., 3M, Safety-Kleen, Sara Lee, Teleflex.- Falling interest rates help all utility stocks. But which utilities figure to benefit most in the long run from economic and environmental changes? According to Smith Barney utility analyst Edward Tirello, utility investors should consider six prime factors: 1) regulatory climate, 2) management, 3) fuel source, 4) ability to switch fuels, 5) capacity utilization, 6) ability to hit permitted profit targets. Tirello believes five utilities score high on each measure: American Electric Power, Dominion Resources, Duke Power, PacifiCorp, SCE Corp.
- If you believe the consensus earnings forecasts for the 30 stocks in the Dow Jones industrial average, says Forbes' Gilbert Steedley, this recession isn't going to amount to much. "Analysts still expect 1991 gains for all but International Paper, Union Carbide and Woolworth. And the Dow is still selling for only 11 times earnings. In fact, nine Dow stocks recently sold for less than eight times projected 1991 earnings: Allied Signal, Alcoa, American Express, Bethlehem Steel, Primerica, Sears, Union Carbide, United Technologies, Westinghouse.
- The dollar's comeback vs. the German mark will continue for some time, predicts Robert Brusca of Nikko Securities. "East Germany is in terrible shape. Yet once reunification was announced, the mark rose. Why should it rise when West Germany is being bound with a country that's a laggard in every economic respect? The mark is being supported by tight money, not by good economic fundamentals."
- Not all high-yield corporate bond funds are devoted entirely to junk bonds. And those that are aren't entirely committed to the "junkiest" of junk. In fact, despite the 12.3 percent average loss for junk funds last year, the five best-performing funds in the category actually made money, says Lipper Analytical Services. The five: Bartlett Capital Fixed Income (up 4.85 percent), Federated Floating Rate (up 3.46 percent), Midamerica High Yield (up 2.75 percent), Financial Bond-Select Income (up 2.29 percent) and Plymouth High Yield (up 2.02 percent).
- A high yield can be a danger signal for a stock, says Executive Wealth Advisory (1328 Broadway, New York, NY 10001). "An important test of a company's dividend safety is its ratio of current assets to current liabilities. Ratios below 1.1 are too close for comfort. Another key number is the payout ratio, or the percentage of profits paid in dividends. Above 60 percent is excessive."
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.