International Herald Tribune
11-03-2001
THESE ARE the times that try wisecrackers' souls. Ordinarily, The Money Report would use this issue to take a critical look at the recommendations that appeared in its pages during the third quarter. As they have for the past four years, analysts and fund managers who had the bad luck or clouded vision to recommend buying stocks that subsequently fell in price would come in for a drubbing. But extraordinary times call for extraordinary measures. So for this quarter, The Money Report declares a general amnesty. No one who recommended stocks to buy in July, August or September will be upbraided if their picks fell in price by Oct. 26, the cut-off date for the accompanying tables. The reason is simple and obvious: The terror attacks on the World Trade Center and the Pentagon on Sept. 11 changed the world, and no one can or should be held accountable for failing to factor that change into an investment strategy in advance. In fact, why even talk about investment strategy at a time like this? While picking and buying stocks may for some people be a discretionary, and therefore expendable, activity, for other people it is the most efficient way to build up enough savings for housing or education or retirement. Financially uncertain times make it even more important for these investors to get sound advice. The fact that the world economic picture was already looking grim and unsettled before Sept. 11 is apparent from the general pessimism of the third-quarter recommendations. Of the 80 stocks mentioned during the period, 17 were recommended as ones to sell or avoid. That is almost one in four, a record for a quarter in which analysts were not specifically asked to provide negative advice. And in fact, six of those 17 stocks also drew buy recommendations proof, if any were needed, that two investors looking at the same set of numbers can draw strikingly different conclusions. So how did the professionals do? Pretty well, considering the circumstances. The overall tally for the period is 47 stocks declining and 33 rising. But of the decliners, 11 had been expected to do just that and of the stocks that rose, six were predicted to fall. So all in all, 38 stocks out of 80 did what at least one analyst said they were supposed to do. Telecommunications stocks, the subject of the Sept. 15 issue (which was reported before the attacks), drew many of the most vehement sell recommendations from analysts who tied the fortunes of the companies to the declining growth in Internet use. But telecoms proved to be some of the best performers, largely because, perhaps now more than ever, they are regarded as safe. In Asia, NTT Corp. and its mobile spin-off, NTT DoCoMo Inc., notched some of the most impressive gains of the period. Korea Telecom Corp. also rose. Some of the former telecom monopolies in Europe, which were regarded as bad bets because of their heavy debt loads and high spending to acquire third-generation mobile licenses, defied the predictions: Deutsche Telekom AG, France Telecom SA, Telecom Italia SpA, Telefonica SA and Swisscom AG all rose. In the United States, the biggest winners were mobile and long-distance companies such as AT&T Wireless Corp., Sprint Corp.-PCS Group and WorldCom Inc., while two former Baby Bells SBC Communications Inc. and Verizon Communications Inc. were the rare decliners. Verizon is the local phone company in New York and Washington, and it suffered some direct damage in the World Trade Center attack, which accounts for at least some of its problems. It may be difficult to remember that far back, but before Sept. 11 some airline stocks were looking good to many analysts because of the prospect of a drop in jet-fuel prices due to a persistent oil-supply glut. An article on Sept. 8 mentioned Air France SA, Austrian Airlines AG, British Airways PLC, KLM Royal Dutch Airlines NV and Swissair Group AG as likely beneficiaries of lower fuel costs; oil prices have indeed dropped, but so have the airlines' shares. An exception was Alitalia SpA, which rose only slightly. It may also be difficult to recall that for most of the past year, some of the greatest threats to public health came from two livestock diseases mad cow and hoof-and-mouth. Not too surprisingly, then, the beef business the subject of two Money Reports in August produced no winning stock picks, in part because consolidation has left few public companies in which to buy shares.One exception is Genus PLC, a British company that develops breeding technology to improve food yields per animal. The good news, said Stephen Thomas of Rathbone Neilson Cobbold Ltd., is that Genus is very good at what it does; the bad news is that the company's advances might put it out of business the world only needs so much beef and milk. Genus shares, recommended to hold, fell 39 percent. Well before the U.S.-led military air strikes on Afghanistan began in September, two securities firms Merrill Lynch & Co. and Lehman Brothers Inc. engaged in an on-paper skirmish in the Aug. 25 issue over European aviation and defense stocks. Merrill analysts, starting from the belief that commercial aviation was a liability, recommended that investors buy shares of BAE Systems PLC, Finmeccanica SpA, Meggitt PLC and Smiths Group PLC all defense contractors with relatively little exposure to the commercial sector and avoid EADS PLC, which owns Airbus, and Rolls-Royce PLC, a major supplier of engines to airlines. Lehman, taking the position that commercial aviation was poised to take off, issued the opposite advice. So far, it is a standoff: Shares of all the companies fell. Hidden treasure, the subject of the Sept. 1 issue, turned out to be prescient in that the ''treasures'' undervalued assets or underappreciated side businesses so far remain buried. Bayer AG is a case in point. For many investors the German chemical and pharmaceuticals giant is a spin-off waiting to happen, but Gregor Smith of Aberdeen Asset Management advised caution, saying that nothing good was likely to happen to the stock until the company's board completed a strategic review of whether to split into two companies. Bayer stock is indeed languishing already battered by deaths related to its Baycol anti-cholesterol treatment, it had slipped almost 4 percent by Oct. 26 but for a different reason: The company, maker of the anti-anthrax treatment Cipro, cannot exploit the full price potential of the antibiotic for fear of being accused of trying to profit indecently from bioterrorism. Two other stocks mentioned as having unexploited potential Johnson Matthey PLC, a mining company with significant platinum assets, and Innogy Holdings PLC, a power generator with a profitable sideline in energy storage also fell in the period. Finally, a note about courage. Immediately after Sept. 11, even professionals were understandably skittish about recommending anything. But in the Sept. 22 issue, which was the first one reported entirely after the attacks, one brave soul offered a couple of stocks that he said investors could still consider safe bets. Jean-Marie Eveillard, manager of the First Eagle SoGen Global Fund and a regular participant in our investment roundtables, picked out Carrefour SA , the French operator of hypermarkets, as a company that has held its own in some of the toughest market conditions around the globe, including in its home market. Carrefour shares, recommended at 46.34, closed Oct. 26 at 58.10 a rise of 25 percent. Mr. Eveillard also singled out Costco Wholesale Corp., a U.S. discount retailer that he said would prosper because of its good business model and solid financial foundation. By the end of the period Costco shares had risen almost 30 percent, to $40.52.
2001 Copyright International Herald Tribune. http://www.iht.com
Комментариев нет:
Отправить комментарий