Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.bonus,americast.usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, Oct 23 1992 Date: Fri, 23 Oct 92 04:43:42 EDT Message-ID: 10-23 0000 BONUS: Pros prepare for Clinton win USA TODAY Update Oct. 23-25, 1992 Source: USA TODAY:Gannett National Information Network With the election just 11 nail-biting days away, Clinton mania continues to wow 'em on Wall Street. And some pros see the rage only growing. In brief, if you buy polls that say Bill Clinton will squash George Bush - and that's still an if - just about every stock market pro has a sure-fire, can't-miss idea on how to make a buck on a Clinton win. The big problem, though: Many of the widely touted stocks are no longer cheap, having already shot up on a potential Clinton victory. ARE INVESTORS TOO LATE? So if you're about to get caught up in the heat of Clinton-mania, check your entry points. You may well be a latecomer to the game. Veteran market analyst Larry Wachtel of Prudential Securities aptly sums it up. "The themes have been sounded and I'd play a Clinton win. But differentiate between trading and long term investing. Traders will be out of `Clinton stocks' the day the election results are announced or before. It'll take at least a year for any pluses to be realized at the bottom line. So think long term." ARE SOME OF THE INCREASES SHORT-LIVED? B.J. Willingham, investment boss of Transamerica Fund Management, a Houston-based money manager with $3 billion in assets, also fires off words of caution. "Clinton will probably win and some stocks will do well. But why chase those that have run up on a fad? Many gains the past few weeks (some 10% to 20%) are already discounting the good news of the next year or two." WHAT ONES ARE FADS? In particular, he cites: Fluor, an engineering giant and a play on rebuilding the infrastructure. H&R Block. A tax preparer and a play on a revision of the tax code. John Nuveen, a municipal bond dealer that's likely to benefit from higher municipal bond sales during a Clinton administration. The theory is Clinton will raise taxes for the wealthy and they'll flock to tax exemptions inherent in municipal bonds. DO PROS LIKE CLINTON? Still, Willingham is not ruling out buying those stocks. "I might buy 'em, but only on weakness," he says. One big reason for Clinton-mania is an apparent change of heart by many pros on the impact of a Clinton win. Many had viewed him as a major threat. They feared big time spending and subsequent stock and bond drubbings. WHY THE CHANGE OF HEART? Bonds indeed have been whacked. But stocks, given the uncertainty of a Clinton administration, are holding up well. Why? "Clinton's no longer thought of as a disaster, a reckless spender," says influential market analyst Elaine Garzarelli of Shearson Lehman Bros. "He could even be wunderbar." Simply put, she sees Clinton serving up a short term package of fiscal stimulus that should help pep up the economy, create jobs and pump up corporate profits. WHAT ABOUT INFLATION? She rejects the concern that such action would be inflationary. "With so much slack in the economy (in terms of low use of production capacity and high unemployment), it'll take years of overspending to get inflation going again," she says. So she figures there's further room for credit easing by the Federal Reserve. "Tighter credit is at least a year away," she says. HOW WILL THE ECONOMY GROW? Garzarelli figures the '93 economy will grow just under 3% and that corporate profits will rise 16.5%. Of her five top Clinton plays, one, Browning-Ferris Industries, is directly related to cleaning up the environment. The other four are beneficiaries of increased economic zing she sees under Clinton. She sees the five averaging about a 25% gain the next 6 to 12 months. WHAT WILL THE DOW DO? A big plus, she says: They're all down about 40% or more from their '87-'92 highs. Dubbed "go-go Garz" by co-workers because of her continued strong bullish view of stocks, she sees the Dow Jones industrial average climbing to 3800 the next 6 to 12 months. (Thursday's close: 3201.) "The market signal is still go," says Go-Go, who's been riding the bull since October '90 when the Dow was 2365. WHO WINS IF CLINTON GETS WHITE HOUSE? Wachtel rattles off a number of themes and names he feels could benefit from a Clinton win. Chief among them: Engineering: Fluor, Foster Wheeler, Morrison Knudsen. Road rebuilding: Kasler, Granite Construction, Caterpillar, Ingersoll-Rand. Environment: Waste Management, Browning-Ferris. Education and job retraining: Paramount Communications, National Education, General Cinema and Houghton Mifflin. Health maintenance organizations (a play on cutting health care costs): United Healthcare, U.S. HealthCare. Many HMOs already have rocketed this year. ANY TAX CUTS FORESEEN? The chart lists five companies Wachtel thinks could generate 15% to 20% price gains the next 12 months. Willingham figures a Clinton win will produce fiscal stimulus of modest proportions - probably tax cuts for lower income brackets and investment tax credits for business. Tax credits should be especially beneficial to technology companies, prime players in boosting productivity. Willingham's top Clinton plays, as the chart shows, are companies that will benefit from rejuvenated consumer and business spending. He sees price gains ranging from 20% to 30% the next 6 to 12 months. WHO GETS DOWNSIZED? By the same token, he's downsizing the big drug firms, since he sees them under unrelenting pricing pressure in a Clinton administration. Regardless, though, of who wins the presidency, Willingham figures "the die is cast for the stock market." His view: The Federal Reserve will continue to ease interest rates and the economy and earnings will grow modestly. WHAT'S THE OVERALL OUTLOOK? That means, he says, inflation will stay low, the bond market will do well despite its current selloff and stocks should go higher. Morris Mark of New York's Mark Asset Management (assets: $500 million-plus), rates Apple Computer a major beneficiary of a Clinton win. The big pluses: Apple's big role in boosting education and productivity. Ditto a leaner, meaner and more profit-oriented Caterpillar, the leading maker of construction equipment. WILL CLINTON REALLY WIN? Likewise, a trio of other companies that could benefit from an invigorated economy under Clinton. Mark feels each has the muscle to rack up a 30%-plus gain the next 12 months. "It's obvious Clinton will win," says Mark. "He's focusing on the issue everyone is concerned about: the economy. And he says he's committed to doing something about it. If he's as strong as he wants us to believe he is - and my gut is he's strong - we ought to be in a real good environment. Unless the next government is run by an idiot, things should get better, maybe a lot better." WHERE IS THE EXCITEMENT COMING FROM? Much of his enthusiasm centers on low inflation, reasonably stable money markets and the likelihood of falling long term rates. All should stimulate the economy and beef up the earnings of his favorite companies. Sounds good to me, but Merrill Lynch's top economist, Donald Straszheim, hoists cautionary flags. He recently told institutional investors in London that Clinton's economic focus is likely to be long term, not short term. WHAT IS CLINTON'S OBJECTIVE? That means, he says: "No quick fix." Like everyone else, he figures Clinton's chief objective the next four year would be a second term. So rather than trying to stimulate the economy immediately, he would pitch policies designed to set up a strong economy in '95 and '96. In other words, don't hold your economic breath. Yet another cautionary note to impressionable investors comes from yours truly: Clinton looks like a winner - but he hasn't won yet. Bonus Editor: Beth Mann. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM