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PLAGUED BY PLUNGING INTEREST rates? Baffled by an overvalued stock market? Join the crowd of nervous investors who have become increasingly choosy over the past year about where they park their funds. The result: a "stock-picker's" market, in which investors rely heavily on advice from the pros.

Well, it's time to turn back the clock. Twice each year, BLACK ENTERPRISE convenes its investment Roundtable, a gathering of six professional investors who project where they think the markets, and individual stocks, are headed. How'd they do? Seeing how average stock prices barely changed in the year since BE's October 1992 roundtable (held in mid-June), our experts' foresight proved truly impressive.

For the 12-month period beginning June 15, 1992, a market basket of one dozen stocks (two choices each from our six panelists) has risen 18.55% - more than double the gain in the S&P 500 stock index, at 8.73%. To boot, five of the stocks are now fetching prices that are 32% to 128% higher than a year ago. Of course, some stocks were losers - one took a painful 50% beating. (See "Hits" and "Misses.") Keep in mind, though, stock investing is a long-term proposition. Thus, a year in the life of any stock is no true barometer of its five- or 10-year potential. Still, the 12-month ups and downs of our experts' picks says quite a lot about what's happening in stock investing today. Here's the final scorecard (our calculations take into account the net aggregate increase for each stock pair).

JOHN W. ROGERS Jr.: Up 5.90%

From Jurassic Park's T. Rex and Barney on PBS, it seems that Hasbro Inc. has packaged everybody's favorite dinosaurs. Smart move. These popular creatures, re-hatched by Hasbro as huggable playthings, have helped make the world's largest toy manufacturer a stock-market winner in 1993. Over the past year, Hasbro shares surged 32%, from $28 to $37.

Last October, John W. Rogers Jr., president of Chicago-based Ariel Capital Management Inc., couldn't have foreseen dinomania. Yet he knew that the Pawtucket, R.I.-based Hasbro was well-positioned to end up in the stock market winner's circle. "They've done a very good job of diversifying their business," explains Rogers, adding that, "they're not dependent on one hot toy." Indeed, Hasbro owns a whole stable of valuable brand names, including Milton Bradley and the Cabbage Patch Kids.

When he selected the stock a year ago, Rogers, who manages $2.1 billion for public and private pension and mutual funds, figured Hasbro would shine in part because Wall Street was still down on the company's disappointing earnings. A value-oriented investor, Rogers was willing to look beyond that temporary setback and see the company's real worth. Ironically, poor earnings were exactly what clobbered Rogers' other pick - Jostens Inc. Known mainly as the maker of class rings, yearbooks and other products for the educational market Jostens had in 1989 launched integrated learning system computer software for schools - an innovation which now accounts for 25% of the company's business. With widespread anticipation that the U.S. economy would begin to revive after the recession, Rogers predicted burgeoning sales of the software.

It didn't happen. Not only has the economy limped along ever since, but lean public school budgets haven't been supporting the products. In fact, shares of the Minneapolis-based Jostens sank 23% over the past year to $19. But Rogers likes to buy stocks on weakness, with an eye to capitalizing on their rebound, so he's an even bigger fan of the company today.

ALAN B. BOND: Up 10.4%

When Alan B. Bond bought a Nordic Track fitness machine three years ago, he liked the product so much he bought the company. Well, actually, Bond, the president and chief investment officer of Manhattan's Bond, Procope Capital Management, picked up shares in CML Group Inc., the company that manufactures Nordic Track. CML, which also owns the Nature Company chain of retail stores, was one of Bond's picks for the BE roundtable. As for its performance? It was a muscle-bound success, spiking 70%, from $23 to $39.

"It's always good to have experience with the product," says Bond. Millions of health-crazed Americans like Bond have helped make Nordic Track one of the hottest-selling fitness machines. Even cheaper clones couldn't knock this CML product off balance. Not surprisingly, Acton, Mass.-based CML hopes to repeat its U.S. success in Europe.

Unfortunately, Bond's other pick, Kirkland, Wash.-based Costco Wholesale Corp., was a market dud. The chain of warehouse clubs dropped 39% (from $27 to $16.50) since it got Bond's nod. A value-oriented investor, Bond, whose firm manages over $300 million for institutional clients, was drawn to Costco because the company seemed durable and underpriced in a very competitive industry. Costco has survived, all right, but in 1993 the buy-in-bulk retail industry has sagged further. Even high-flying Wal-Mart operator of the Sam's Club warehouse chain, has taken a beating.

Earlier this year, Costco struck a deal to acquire one of its competitors, the Price Club Chain. Bond says he still likes Costco, even more now that it's cheaper. "We were early in anticipating the consolidation. I think the new company which will emerge in 1994 will be a dominant player in the industry."


Louis Holland called it an "educated kind of luck" that saw one of his favorite picks last year, American International Group (AIG), surge 48% (from $88 to $130) over the past year.

The New York-based insurance giant, like other property/casualty companies, had been in the investment doghouse for the past three years. Burdened with high fixed costs and suffering from unremitting price wars with its rivals, AIG was a gutsy call. But it fit the profile that Holland likes. "We seek out companies that are growing faster than the market," says Holland, managing partner and chief investment officer of Chicago-based Holland Capital Management The firm has $175 million under management mostly from small institutions, governments and wealthy families. "Also, AIG is one of America's best-managed companies."

Perversely, it hasn't hurt that in the year since our roundtable the world has been beset by catastrophe, from Hurricane Andrew to tragic oil-tanker accidents. The huge losses suffered by the property/casualty industry are so extreme, investors believe insurers will have to raise premiums. That may not bode well for policyholders, but it probably means higher prices for the industry's stocks.

On the other hand, Chicago's Sare Lee Corp., Holland's second pick in 1992, can't expect a big rise in earnings growth. The maker of baked goods and other foods doesn't suffer much during hard times, nor does it fatten when times get better. Sara Lee's shares haven't been so sweet; they were down by 3.8% exactly 12 months after Holland made his choices.


Oddly enough, the Jurassic Park phenomenon figured strongly in the scorecard of Barbara Landers Bowles, founder and president of Chicago's Kenwood Group Inc.

Bowles, whose firm manages $70 million, was high last year on Autodesk Inc., a software developer that dominates the market for computer-aided design, or CAD. Autodesk's shares shot up 44% in the 12 months since she recommended the stock. "The company's technology is used in movies like Jurassic Park, as well as in industrial design and architecture," she explains.

A year ago, Sausalito, Calif.-based Autodesk had stumbled and the stock price was low at $36, Bowles felt. Although the company has 72% of the CAD market, its strength was in the high end, where its software ran on expensive workstations rather than on low-end PCs. Corporations, however, were shifting toward PCs, and the workstation market was beginning to suffer.

Fortunately, Autodesk has since leaped into the market for PC software. -We felt its problems might be solved, and they were", says Bowles.

The dominant manufacturer of workstations, Boston-based Sun Microsystems, was Bowles other pick, and it has risen a modest 13%. One reason it didn't do better is that such rivals as Hewlett-Packard and Silicon Graphics are producing better workstations - and charging more for them. (In fact, Silicon's technology performed the animation magic that gave life to Jurassic Parks dinosaurs.) In addition, Sun's low-end workstations are running neck and neck with ever-more sophisticated PCs.

Although Bowles' picks climbed a combined 31.4% in the last year, she's cool to both of them. Sun's competitive problems are getting worse, and she considers Autodesk to be just "fairly" priced.

MACEO K. SLOAN: Down 28.7%

With an investment horizon of five to 10 years, Maceo K. Sloan, president and chief executive officer of NCM Capital Management in Durham, N.C., invests for the future. So eventually his 1992 picks may pay off, but over the past year they have not.

NationsBank, Sloan's winning pick, edged up a negligible 4.3%. Actually, it did fine until last April, when inflation jitters caused the entire financial-services sector to take a stock-market dive. At one point during 1992, the bank's shares were up 26% from the time when Sloan recommended them. Meanwhile, the Charlotte, N.C.-based bank has slashed non-performing loans and boosted operating efficiency, exactly as he forecasted last year.

As a result, Sloan, whose company manages a $2 billion portfolio for institutional investors, is still recommending the super-regional. "This is the type of stock you can feel very comfortable with over the next few years," he wagers. "It is going to do well."

But unlike other stock pros, he's not touching his other 1992 pick, Armonk, N.Y.-based International Business Machines Corp., even though the price has plunged nearly 50%, to $49. Big Blue is "going to trim down to a PC boat again instead of an aircraft carrier," Sloan predicted last year. Unfortunately, he was right.

Shortly after making that comment IBM announced a drastic restructuring, laying off workers for the first time in its history as computer buyers fled to cheaper, generic PCs. Sloan moved out of the stock halfway down its price slide, and is still shunning the issue. But we're watching IBM very closely, and at some point we'll be a buyer again," he says cautiously.

Combined, Sloan's two picks for BE declined 28.7% in 12 months, giving this investor the dubious distinction of a cumulative loss.


At New York-based Woodford Capital Management owner and president Peggy Woodford Forbes' current favorite stock - as well as her first BE roundtable pick - is Intel Corp. No wonder, since the Santa Clara, Calif.-based maker of computer chips hasn't let her down. The shares mushroomed a stunning 128% in the last year (from $25 to $57), for the best performance clocked by any of the roundtable's picks.

"This is our biggest holding, and has been for some time," says Forbes, who handles $130 million in investments for both wealthy individuals and institutions. "Intel is the leading manufacturer of integrated circuits; they're creating the fastest computer chips, and they've been able to beat Japan and become the world's leader in the field."

Forbes's other selection, Gap Inc., "is a tremendous company," but the stock is little changed in the last year, ahead just 2.6%. Like many of the BE panelists, Forbes had expected an earlier, stronger economic recovery. Meanwhile, San Francisco-headquartered Gap, like so many other retailers, is having trouble moving garments. While Gap shares have advanced somewhat she isn't recommending them now. "Amidst so much uncertainty about jobs and employment, people are reining in their spending," Forbes notes. Still, anyone who took her advice last year could at least confront an uncertain future with more cash. The combined gain of her two picks was an eye-popping 56.3%, the best among our panelists.
COPYRIGHT 1993 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:1993 Money Management Guide; stock market analysis for 1992
Author:Middleton, Timothy
Publication:Black Enterprise
Date:Oct 1, 1993
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