Richard Stuckey is one economist worth listening to. The E.I. du Pont de Nemours numbers-cruncher recently won the Silbert Economic Forecasting Award for 1988. According to Sterling National Bank and Trust Co., Stuckey's forecasts have been 99.59 percent accurate the past three years. Stuckey feels 1989 will be another year of good growth, with little chance of a recession. He expects consumer spending to keep rising, while prices increase only 4.5 percent, all very good news for the stock market.
- "Loyalty to quality" is the key for the Dodge & Cox Stock Fund in San Francisco. D&C buys high-yielding blue chips at bargain prices, then holds on until they recover.Such persistence allowed Dodge & Cox to appreciate 18.6 percent on average the past 10 years. Recent largest holding: IBM, Dayton-Hudson, GM, SCE, Procter & Gamble, Digital Equipment, Deere, Caterpillar, Carolina Power.
- "Big steel is back," trumpets Value Line, tabbing steel stocks "No. 1 for timeliness" in 1989. "Capacity has been slashed 30 percent to 40 percent, the work force has been streamlined, modernization programs have been accelerated. This smaller but decidedly stronger industrial sector could well produce record profits by 1991-93, something that seemed inconceivable until very recently." Value Line's favorite vehicles for playing this recovery: Armco, Bethlehem, Inland, USX.
- A sound stock-picking strategy during times of rising interest rates is to buy companies that can raise their dividends faster than average, notes Maneck Kotwal of Smith Barney. Kotwal recently screened a 3,000-stock universe for companies that have upped their payouts eight of the past 10 years without cutting them once. He found eight New York Stock Exchange issues that produce above-average yields and could raise dividends at double-digit rates: Banc One, Deluxe, First Wachovia, K Mart, Pfizer, Philip Morris, Torchmark, UST.
- The latest wrinkle in junk bonds is "payment in kind" (PIK). PIK bonds allow issuing companies to pay interest on previous bonds with still more pieces of paper. The lure is that PIKs represent yields well above the general market. The dangers, says Forbes' Ben Weberman, are that income taxes must be paid on these theoretical dividends, most PIKs are callable at par, and issuing companies are often so troubled that they could disappear before investors see any actual money.
- Most investors are better off avoiding offshore mutual funds, warns Investigate (2211 Lee Road, Suite 103, Winter Park, Fla. 32789). "Many, especially those chartered or based in high-profile Caribbean tax havens, are dangerous. We've seen too many turn out to be frauds to be comfortable with any.
"Some European funds may be worth buying, but only if you're a large, sophisticated international investor. Most people are better off sticking with U.S.-based funds."
- Another indication that stocks are your best long-term bet, courtesy of Ibbotson Associates in Chicago: "From 1926 through the end of 1987, the total return on the S&P 500, including reinvested dividends, was 9.9 percent annually. Long-term Treasury bonds returned only 4.3 percent during this period, and Treasury bills earned just 3.5 percent, barely better than the inflation rate."
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. (C) 1989 Universal Press Syndicate 4900 Main St., Kansas City, Mo. 64112