|
How to weather the storm
|
 |
January 14, 1999: 6:43 p.m. ET
Experts recommend small caps, utilities, and selected technology issues
|
NEW YORK (CNNfn) - By now, it probably sounds like a familiar refrain: in times of market turmoil, investors should keep their heads and think about the long term.
However, with the Dow tumbling more than 350 points in the last two days, experts say it's too easy to forget common sense strategies when your stock portfolio is losing altitude.
"There are no real hiding places," said Hugh Johnson, chief investment officer at the brokerage First Albany Corp. "But I would tell investors they shouldn't get too scared by what's happening. Don't forget that 70 percent of the time, stocks are going up. I don't know where the market is going in 30 days, but I know where it's going in 30 years."
What a week it's been. Heavy selling pummeled Wall Street for a second day Thursday after Brazil devalued its currency and triggered new fears about the economic conditions in Latin America, a major U.S. trading partner.
The Dow's wild ride this week
It was barely a week ago that the bulls stampeded into the year and sent the three market indicators to record highs.
So what's an investor to do as U.S. stocks race up and down faster than a roller coaster?
Study your stocks
Investment advisors say it's more important than ever for you to do your homework and find companies with improving valuations and strong earnings.
"You've got to know the companies you own," said Robert Doll, a portfolio manager at Oppenheimer Funds in New York. "You've got to be very picky."
Doll thinks small- and mid-sized companies might finally start to outperform blue chips. He's bullish about the technology sector, and likes companies that will benefit from the Internet such as Microsoft (MSFT) and Sun Microsystems (SUNW).
Doll also recommends pharmaceutical companies and retail stocks such as home improvement companies Home Depot (HD) and Lowe's (LOW).
Joseph Battipaglia, chief market strategist at Gruntal & Co., said the market is splitting in two directions. Heading up are companies in technology, consumer products, pharmaceuticals, automakers. But he warned against investing in companies going in the other direction, including any commodity-related businesses.
"When you look at how the market is trading, the big cap names in the right sectors are leading the market," Battipaglia said.
Change your holdings
You might also consider shifting around your portfolio, Johnson said. You could move some of your holdings from stocks into cash or bonds, or choose less risky stocks. Utilities, food companies and tobacco all weather volatile times better than other issues, he said.
Johnson cautioned investors to watch consumer products stocks, often a place of safety, because some of them like Procter & Gamble (PG) and Coca-Cola (KO) have a higher exposure in Latin America.
And even though small cap stocks might offer a haven from international exposure, Johnson said portfolios with a 3- to 5-year outlook should include blue chips like IBM (IBM), Cisco Systems (CSCO), Microsoft and Sun Microsystems.
Perhaps the most important advice for investors is not to watch the stock market every day. If you see a dip, you might be tempted to sell a great long-term holding. Likewise, you might be lured by volatile and speculative Internet stocks.
"I tell my clients to look at the market once a week," Johnson said. "It does a lot for your judgment if you take away the day-to-day swings."
|
|
|
|
|
 |
|
