More than instinct alone: a methodical Hamilton Lewis checks out the market before investing.

Call it intuition. Chalk it up to clairvoyance. However you explain it, money manager Hamilton Lewis (888-373-2082) has a knack for homing in on the best spot to be at the best possible time--an ability he counts on today to select stocks on their way up.

The first time the talent came in handy for Lewis, however, had nothing to do with share prices. Almost 20 years ago, at age 21, Lewis fled a civil war that engulfed his homeland of Liberia and arrived in New York with $400 in his pocket. Lewis knew enough to call a family friend in Houston on a lark, and hopped on an Amtrak train to visit. Less than a week later, the 6 ft. 8 in. Lewis landed a basketball scholarship to Houston Baptist University, which he helped lead to a 27-4 season and a NCAA tourney berth in 1984. After graduating, Lewis stayed in Houston, working first for several brokerage firms before finally starting his own outfit, Hamilton Lewis Capital Management, which now supervises $40 million in funds for individuals (the minimum he'll manage is $100,000) and small corporations.

Since his arrival on American shores in the '80s, Lewis has done quite a bit of stock market research to supplement his uncanny sense of timing. Picking the right stock at the precise time is key to Lewis' approach, but it starts first with a look at the overall market to find which industry sectors are outperforming the stock market.

"I try to buy stocks in the top-performing industry group, but I want to catch the trend on the way up. You might say I want to be in the church of `What's Happening Now' not the church of `What Happened Last Year,"' he says. To plug in early, Lewis checks industry indices and focuses on groups that are doing better than the overall stock market during the last three months to half a year. It's a step you can mimic by looking in Barron's and examining the publication's breakdown of industry-by-industry stock market performance.

Lewis labels himself a contrarian investor--the sort of stock picker who looks for companies that have fallen from the market's graces but have a lot of potential. "I think that if a company's stock price has fallen from a certain level, it stands a very good chance of returning to that same point, unless something is very, very wrong," he says. Once he's selected an industry or sector that looks promising, he checks to see which stocks have fallen the most from their 52-week high, or the highest price that stock might have attained during the previous year.

Not that he's willing to go completely out on a limb. The Houston-based money manager also wants a sense that the overall stock market is starting to reconsider a company. He then checks on the average trading volume--another stat listed in Barron s. Heavy volume means a lot of people or institutions are starting tO get back into a stock.

Growth stocks, companies that are in hot new areas, are what piques Lewis' interest these days. "The stocks I tend to buy don't usually pay dividends and often enough, their price-to-earnings multiples are a little higher than blue chips," he says. "But I have my limits; I won't buy a stock whose P/E ratio is much more than 10%-20% above the industry average."

Currently, Lewis likes Apex PC Solutions (Nasdaq: APEX), a company that builds cabinets for multiple computers. "Everyone is looking for ways to save on space, especially now that computers have invaded the workplace," says Lewis who thinks Apex can grow earnings between 25% and 50% annually. He anticipates a 2-for-1 split, another favorable sign, and thinks the $39.25 stock can reach $80 in 12-18 months.

Another favorite is C-Cube Microsystems (Nasdaq: CUBE), a company that is a leading force in digital video disks. "This stock reached $75 a year ago, and crashed only because IBM scared the market by saying it was interested in competing in the same business," he notes. Since then the IBM threat has subsided, leading Lewis to think that C-Cube--now $29.13 a share--can soon return to the $70 a share level in a year or so.

Last year, DSC Communications (Nasdaq: DIGI), a Texas company that makes fiber optic equipment, was downgraded by several Wall Street firms because of weak earnings. As a result, the stock dropped from $32 to $13 a share, then rebounded to its current price of $27.75. Lewis is convinced the trouble is now behind the company, and believes that demand will grow for DSC's fiber optic devices. He sees the stock rebounding to $60 a share in the next 12-18 months.

Demographic trends lead Lewis to pick United Healthcare (NYSE: UNH), an HMO that fell from $90 to $30 a share a couple of years ago when President Clinton made a push to boost government regulation of the healthcare industry. Since then, Lewis says, HMOs are coming back with a vengeance, as reflected by the increasing amount of money industry players have contributed to political campaigns. He sees United Healthcare returning to $80 a share in the next year to 18 months.

Finally, Lewis likes Best Buy Co. (NYSE: BBY), a consumer electronics retailer. "People are buying more and more gadgets, and a good sign was Best Buy's move to own more of its outlets rather than rent space," says Lewis. He thinks that demand for computers will help push Best Buy up from a current $23.63 a share to $45 in 12-18 months.

Sizin Up the Prospects
Lewis favors stocks that have fallen out of favor,
but offer potential

Company                  Exchange: Symbol    Stock Price(*)

Apex PC Solutions        Nasdaq: APEX        $39.25
C-Cube Microsystems      Nasdaq: CUBE        29.13
DSC Cummunications       Nasdaq: DIGI        27.75
United Healthcare        NYSE: UNH           51.38
Best Buy Co.             NYSE: BBY           23.63

                         Est. Current        Est. 5-Yr.
Company                  Fiscal Year EPS     EPS Growth

Apex PC Solutions        $0.69               37.50%
C-Cube Microsystems      1.05                25.00
DSC Cummunications       0.90                21.33
United Healthcare        2.29                19.37
Best Buy Co.             0.72                14.50

(*)As of 9/24/97

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