THE MONEY ALL STAR BROKERS' TOP PICKS FOR '97 AFTER SCORING GAINS THAT AVERAGED 21% IN 1996, OUR 10 SUPERBROKERS RECOMMEND 30 STOCKS THEY BELIEVE ARE NOW POISED TO TURN A 39% PROFIT OVER THE NEXT 12 MONTHS.
By JUNIUS ELLIS

(MONEY Magazine) – Can you estimate how your portfolio has performed in the year since MONEY published its 1996 roster of 10 All Star brokers and their 30 top picks? Here's a yardstick--the S&P 500-stock index rose a rousing 17%. And our 10 superbrokers' record? Their recommendations gained an average of 21%, or nearly 24% more than the index.

If that 21% profit also surpasses yours, be sure to check out the advice of our 1997 All Stars, the seventh such team we've fielded since 1988. After recruiting our new lineup, we asked the team members to single out the stocks they're most confident can score superior returns in today's aging bull market. The resulting 30 recommendations, in the opinion of our stars, have the potential to earn market-beating returns averaging 39% over the next 12 months.

Our '97 team sports four new members plus six repeaters from '96 (their reward for matching or outpacing the S&P 500). Way out front is Omaha's Buzz Garlock, pictured at left, whose 65% average gain in '96 may well have upstaged the return of Omaha billionaire Warren Buffett. Garlock, a 16-year market veteran from Dain Bosworth, is making his second appearance as an All Star. Merrill Lynch's Charles Dare, another second-year man and 36-year pro from suburban Detroit, finished No. 2 with a 44% profit. And regular MONEY readers no doubt can recall the consistently hot hand of No. 3, Stanley Trilling, up 36%. This four-year All Star and 27-year veteran from Paine Webber in Los Angeles came in first in '94 (up 43%) and second in '95 (up 46%).

In selecting our All Stars, we first sought referrals from money managers and brokerage executives, who were asked to nominate exemplars at firms other than their own. Candidates had to be willing to take new accounts of $150,000 or less and to have a pristine record of professional conduct according to the National Association of Securities Dealers, one of the best sources of disciplinary actions taken against brokers. In addition, the 10 brokers profiled below typically:

--Base their recommendations on their own research as well as on that of analysts at their firm

--Personally own the stocks that are on their buy lists

--Avoid selling most brokerage products whose gold-plated fees can weigh down clients' returns

--Give regular customers commission discounts of 20% to 25% in many cases

The following profiles appear in order of the six returning brokers' average gain over a recent 11-month season that started Nov. 10, 1995. Their four new teammates are then listed alphabetically. The profiles feature each broker's top three picks (or pans) and overall market outlook over the next 12 months. Three are bullish; seven are anxious; none are bearish. The brokers see their 30 recommendations appreciating 39% as a group in '97 in step with earnings growth averaging a brisk 30% (see the table on page 76 for target prices and other data). That's five times the 6% profit growth forecast for companies in the S&P 500. Yet the picks are priced 17% below the market's earnings multiple, recently 18 based on most analysts' projections for '97.

BUZZ GARLOCK +65% IN 1996

Firm: Dain Bosworth in Omaha, 800- 950-3246 Age: 42 Rookie year: 1980 Client households served: 300 Account Minimum: None Average account: $200,000 Outlook: Anxious

Resume: Native of Omaha; graduate of Nebraska's Bellevue University, where he captained the baseball and basketball teams; member of the national council of Omaha's famed Boys Town; career broker who is also the manager of Dain Bosworth's 12-adviser Omaha office

Clientele: Local executives, physicians and money managers

Comment: "I look for unheralded stocks whose prospects figure to improve faster than most other investors can imagine," says Garlock. A year ago, he picked two such sleepers that quickly soared past his target prices, prompting him to recommend their sale in our All Star update at midyear (see MONEY's July issue). They were $450 million oil-rig operator Noble Drilling (up 69%) and $38 million grower Northland Cranberries (up 68%). A third pick, Hibernia Corp., a $7 billion (assets) Louisiana bank, was held for a 9% gain. What about his two replacement picks at midyear? Landmark Graphics, a $190 million innovator in seismic software used by oil drillers, gushed 61% on news of its buy-out by Halliburton, a $7 billion giant in oilfield services. But Garlock took a 12% loss on $100 million Elamex, an assembler of electronic circuit boards in low-wage Juarez, just over the border from El Paso.

Picks for '97: Buy $105 million Intervoice (ticker symbol: INTV; recently traded over the counter at $12; no dividend), a leader in the software that allows, say, credit-card customers to phone in to check their balances via touch-tone commands. Garlock sees this Dallas firm's profits increasing 20% annually over the next three years, lifting the stock 58% to $19 by the end of '97. Buy $297 million Input Output (IO; New York Stock Exchange, $28; no dividend), a Stafford, Texas supplier of seismic gear to the oil industry. Garlock expects rising energy prices and exploration to boost earnings about 50% this year and 33% next, elevating the stock 54% to $43 next year. And buy $1.7 billion fertilizer maker Agrium (AGU; NYSE, $13; 0.8% yield) in Calgary for a projected 29% earnings gain and 46% stock appreciation in '97. "Agrium's pending merger with $650 million Canadian rival Viridian presents lots of opportunities to cut the costs of overlapping operations," predicts Garlock.

CHARLES DARE +44%

Firm: Merrill Lynch in Farmington Hills, Mich., 800-937-0446 Age: 62 Rookie year: 1960 Clients: About 500 Minimum: None Average: $1 million Outlook: Bullish

Resume: Native of nearby Bloomfield Village; graduate of Michigan State, where he lettered in tennis; connoisseur of fine 18th-century American furniture and decorative arts; career broker who heads a four-adviser group that includes son Charles Jr., 31

Clientele: Senior executives and professionals in the U.S. and abroad

Comment: Last year, Dare recommended three stocks whose price/earnings multiples averaged just 14, which represented an enticing 54% discount to their projected 30% profit growth as a group. His bargain hunting produced a 20% gain on First USA, the nation's No. 4 credit-card issuer with $20 billion in total receivables. As for the two other picks, Dare opted at midyear to take his profits on $2 billion bookseller Borders (up 70%) and $19 billion chipmaker Intel (up 5%). They were replaced by $4.5 billion Oracle (up 35%), the computer database whiz, and $21 billion health-care blue chip Johnson & Johnson (up 3%).

Picks for '97: Again buy First USA (FUS; NYSE, $31; 0.8% yield) in Dallas and Oracle (ORCL; OTC, $46; no dividend) in Redwood City, Calif. Dare sees expanding use of credit cards pushing up earnings at First USA 30% this year and 25% next, propelling fus shares 19% to $37. He's betting that Oracle's stock can appreciate another 17% to $54 in step with forecast profit growth of 39% in '96 and 30% in '97. Also buy $592 million Genesis Health (GHV; NYSE, $25; no dividend), a fast-expanding chain of 150 nursing homes based in the Philadelphia suburb of Kennett Square. "We're counting on profits rising about 24% this year and next," says Dare. His '97 target for the stock is $42, a 68% gain.

STANLEY TRILLING +36%

Firm: Paine Webber, Los Angeles, 800-344-3786 Age: 57 Rookie year: 1969 Clients: 350 Minimum: $100,000 Average: $500,000 Outlook: Anxious

Resume: Native of Los Angeles; graduate of the University of California at Berkeley; former marketer at drugmaker Hoffmann La Roche; travel buff who favors European countries

Clientele: Entrepreneurs and money managers who demand fresh ideas from his five-broker Trilling Group with a branch in New York City

Comment: Last year's big payoffs on two small growth stocks, Trilling's specialty, amply offset losses on a pair of delinquents. Trilling's prescient short sale of $104 million Netcom, a high-flying pioneer of Internet access, earned an 81% profit. And he made a quick 76% at midyear on Veterinary Centers, a $250 million chain of 166 pet hospitals. Yet replacement CCA Industries slid 27% when the $45 million beauty-products phenom was slow to produce a new hit potion. He also suffered a 20% share-price deflation in disappointing pick Special Devices, a $100 million supplier of auto air-bag components.

Picks for '97: Buy $104 million Custom Chrome (CSTM; OTC, $18; no dividend) in Morgan Hill, Calif. This supplier of Harley-Davidson accessories, says Trilling, is a great way to ride the bike's cult status among affluent baby vroomers who typically spend $5,000 to $8,000 to customize new Harleys costing $13,000. He expects CSTM's earnings to accelerate 18% next year, turning heads on Wall Street and propelling the stock 67% to $30. Also buy $333 million S3 Inc. (SIII; OTC, $21; no dividend), a Santa Clara, Calif. maker of computer chips that help PCs run memory-hungry graphics and video programs more efficiently. Next year Trilling sees profits rising 42% and the stock hitting $30, a 43% gain.

Pan: Sell short $165 million Cityscape Financial (CTYS; OTC, $22; no dividend). Trilling says the Elmsford, N.Y. firm is an overvalued bit player in the increasingly crowded $120 billion market for high-rate, high-risk mortgages called subprimes. His '97 target is $12, a 45% drop.

JIM VENETOS +27%

Firm: Smith Barney, New York City, 800-323-7788 Age: 51 Rookie year: 1979 Clients: 130 Minimum: $150,000 Average: $2 million Outlook: Bullish

Resume: Native of Brooklyn; graduate of Cornell (B.S.) and the University of Massachusetts (M.B.A.); former manager of hotels like the venerable (circa 1884) Old Deerfield Inn in Deerfield, Mass.; avid tennis player and board member of the King & Low-Heywood Thomas School (grades K-12) in Stamford, Conn.

Clientele: Monied families and many foreigners who value Venetos' skills with languages (German, Greek, Italian and Spanish) as well as investments

Comment: Venetos' winning recommendations of big-name growth stocks last year were paced by $7 billion shaving magnate Gillette, which rose 48%, and $4.6 billion newspaper empire Gannett, which was sold at midyear for a 23% profit. But replacement $21 billion Walt Disney (up 4% and picked again below) as well as $16 billion American Express (up 8%) didn't live up to Venetos' expectations on earnings or stock appreciation.

Picks for '97: Again buy Disney (DIS; NYSE, $69; 0.6%) to capitalize on the Burbank, Calif. firm's $250 million holidays hoopla promoting Disney World's 25th anniversary and eight major new home videos, including red-hot Toy Story. Venetos sees earnings up 21% in '97 and the stock hitting at least $85, a 23% gain. Buy $4.7 billion First Data (FDC; NYSE, $41; 0.1%), a Hackensack, N.J. processor of credit-card data outsourced by banks. Profits figure to jump 32% this year and 22% next, lifting fdc shares about 22% to $50. And buy $37 billion (assets) First Bank Systems (FBS; NYSE, $67; 2.5%), a prosperous midwestern bank based in Minneapolis. "FBS is my favorite low-risk pick," says Venetos, who sees earnings increasing 13% this year and next. His target for the stock is $78, a 16% profit.

PAMELA ROSENAU +20%

Firm: Schroder Wertheim, New York City, 800-992-9876 Age: 37 Rookie year: 1984 Clients: 200 Minimum: $150,000 Average: About $1.5 million Outlook: Anxious

Resume: Native of Bryn Mawr, Pa.; graduate of Sarah Lawrence (B.A.) and Emory (M.B.A.); collector of contemporary artists like Colette; career broker

Clientele: Wealthy people, including many single women and family of Schroder CEO Steven Kotler, who pay Rosenau's annual fee (up to 1% of stockholdings) to manage their money

Comment: "Clients expect me to strike a sturdy balance between growth and income," says Rosenau, "yet still manage to beat the market over time." She delivered with three picks held for the entire '96 season, including $8.6 billion home-products giant Colgate-Palmolive (up 26%), $7.5 billion packager Crown Cork & Seal (up 19%) and $3.5 billion papermaker Temple-Inland (up 15%).

Picks for '97: Again buy Crown Cork & Seal (CCK; NYSE, $50; 2%), a Philadelphia-based supplier of cans and bottles to beverage companies, for a projected 59% earnings gain next year and Rosenau's target price of around $63, another 25%. Buy $12.3 billion Raytheon (RTN; NYSE, $51; 1.6%) in expectation of the Lexington, Mass. conglomerate selling its low-return appliance unit (13% of sales) to expand its high-margin defense electronics business (34%). Her target for the stock is $66, about 30% more, aided by a 12% rise in '97 earnings. And buy $3.2 billion Harcourt General (H; NYSE, $50; 1.4%), the Chestnut Hill, Mass. textbook publisher and 53% owner of $2.1 billion luxury retailer Neiman Marcus. Rosenau forecasts a 15% profit increase next year and a stock price of about $63, a 25% gain.

ISADORE FRIEDMAN +17%

Firm: Paine Webber, Boca Raton, Fla., 800-937-7071 Age: 53 Rookie year: 1969 Clients: 150 Minimum: None Average: $3 million Outlook: Anxious

Resume: Native of Newburgh, N.Y.; graduate of the University of Pennsylvania and Georgetown Law School; collector of contemporary American artists like Larry Rivers; career broker

Clientele: Conservative investors who have placed their sizable personal and retirement accounts under his control

Comment: "My 17% finish in '96 could look huge when we're stuck in an economic slowdown in the first half of '97," notes Friedman, a fourth-year All Star and the team's top performer in '95 (up 74%). Last year's winners included chipmaker Intel (up 47%) and $21 billion media mogul Time Warner (up 10%), this magazine's parent. But he took a 10% loss at midyear on $393 million generic drugmaker Mylan Labs. And its substitute, $2 billion drug company Amgen, turned in a disappointing 3% rise. Friedman expects the following two new picks and one repeat recommendation to shine even in the soggy economy he envisions.

Picks for '97: Again buy Amgen (AMGN; OTC, $58; no dividend) in anticipation of mid-'97 headlines about successful clinical trials of two new Amgen drugs that help arrest Parkinson's disease and reduce body fat, respectively. Friedman figures earnings at the Thousand Oaks, Calif. company can climb 16% next year and 25% in '98, lifting amgn shares 29% to $75. Also, in the first half of '97 Friedman expects federal regulators to approve a $1,850 procedure to track the spread of colorectal cancer cells in the 180,000 Americans who annually undergo surgery to thwart the disease. The device was pioneered by 13-year-old research firm Neoprobe (NEOP; OTC, $13; no dividend) in Dublin, Ohio. "If I'm right," he says, "the stock could hit $20 next year, roughly 50% more." To help offset the high risk inherent in a biotech venture like Neoprobe, Friedman recommends the technology sector's bluest blue chip, $9 billion Microsoft (MSFT; OTC, $144; no dividend) in Redmond, Wash. His target for the stock of the world's dominant software supplier is $166, a 15% rise.

JEFF AUXIER

Firm: Smith Barney, Portland, Ore., 800-452-0966 Age: 37 Rookie year: 1983 Clients: 120 Minimum: $100,000 Average: $300,000 Outlook: Bullish

Resume: Native of Portland; graduate of the University of Oregon; owner of 60-acre Auxier Farms, a hazelnut orchard in suburban Portland; career broker

Clientele: Local business executives and wealthy families including that of paper and textile magnate Robert Pamplin, 85, who Forbes estimates is worth $525 million. Says Auxier: "Bob Pamplin has been a mentor and customer since my first job mowing neighborhood lawns 26 years ago at age 11."

Comment: "My demanding clients expect me to match or beat the S&P 500's return without taking a lot of risk," says Auxier. So he limits his buys to consistently prosperous companies that he believes are temporarily out of investing fashion, including the three recommended below.

Picks for '97: Buy $2.2 billion (assets) Selective Insurance (SIGI; OTC, $34; 3.3%), primarily an auto insurer, which Auxier figures can boost earnings 30% next year in step with continuing productivity gains. For example, annual premiums written per employee of the Branchville, N.J. firm have surged 38% to $438,000 over the past two years. His '97 target for the stock is $54, a 59% profit. Buy $16 billion financial supermarket American Express (AXP; NYSE, $49; 1.8%) in New York City. Auxier argues that axp is a steal based on its global name recognition, booming mutual fund business and his forecast of 14% earnings growth in '97. "I'm betting the stock can hit $65, or 33% more, next year," he says. Also buy New York City's $68 billion Philip Morris (MO; NYSE, $98; 4.9%), which derives 65% of its profits from cigarettes. The latest salvo of smoking-related lawsuits against the company has knocked MO shares down 9% from their August high of nearly $108. A year from now, however, Auxier sees the unduly depressed stock at $127, or 30% more, as investors favorably anticipate a congressional settlement of most smoking lawsuits. How soon? "Within 18 months," predicts Auxier.

CYNTHIA BASSETT

Firm: Paine Webber, Cleveland, 800-533-6386 Age: 57 Rookie year: 1969 Clients: 200 Minimum: None Average: $750,000 Outlook: Anxious

Resume: Native of Cleveland; graduate of the University of Wisconsin; intrepid traveler who has visited both Tibet and Sri Lanka in recent years; career broker

Clientele: Monied Cleveland clans whose accounts often extend through three generations

Comment: "In the riskier market I expect next year," says Bassett, "I'm focusing on bargain-priced blue chips capable of quickly recovering from earnings stumbles that have hobbled the stocks."

Picks for '97: Buy $28 billion Motorola (MOT; NYSE, $49; 1%), a leader in two stalled sectors, computer chips and cellular phones, and based in Schaumburg, Ill. Bassett is confident that Motorola's likely 33% decline in '96 earnings will be offset by next year's forecast 33% profit rise--and 27% stock appreciation--aided by reductions in work force and capital spending. Buy New York City's $112 billion (assets) Bankers Trust (BT; NYSE, $85; 4.7%), now no longer nursing losses from interest-rate hedges called derivatives, for a projected 12% earnings gain in '97 and her target of $105, a 24% profit. Also aim next year for a 22% rebound in earnings and a 25% rise in the share price of $32 billion PepsiCo (PEP; NYSE, $32; 1.5%), the restructuring empire of sodas, snacks and fast-food chains like Kentucky Fried Chicken and Pizza Hut based in Purchase, N.Y.

ROBERT COSTOS

Firm: Merrill Lynch, Baltimore, 800-945-1982 Age: 50 Rookie year: 1972 Clients: 375 Minimum: $150,000 Average: $800,000 Outlook: Anxious

Resume: Native of the Boston suburb of Westwood; graduate of Bucknell (B.S.) and the University of Delaware (M.B.A.), which he attended during his five-year hitch as a Navy officer specializing in nuclear reactors; president of Faith Lutheran's church council; head of three-broker group

Clientele: Owners and executives of Baltimore-area companies

Comment: "With the Dow around 6200," says value-minded Costos, "I'm more concerned about the preservation of clients' capital than the return on it." So he's searching for turnarounds among battered cyclical stocks that he believes have already had most of the risk wrung out of them by past problems in their industries or operations.

Picks for '97: Buy $7.1 billion Jilin Chemical (JCC; NYSE, $12; 5.2%), China's dominant producer of basic chemicals used in plastics and other synthetics. Costos says profits will continue to be stunted in '97 by the higher than expected $875 million cost of building and gearing up a major new ethylene plant. But he sees the stock shooting up at least 50% to $18 within a year in anticipation of a projected 62% earnings rebound in '98. Buy Richmond-based $785 million Pittston Minerals (PZM; NYSE, $12; 5.1%). Costos is betting this ugly duckling coal company can quintuple earnings next year and its stock can appreciate at least 50% to $18, aided by the mid-'97 start-up of Australia's Silver Swan mine, a nickel-rich lode that's 16% owned by Pittston. Also buy the Netherlands' $1.4 billion Elsag Bailey (EBY; NYSE, $16; no dividend), the world's No. 1 supplier of arcane industrial instruments and software called process controls, for a projected earnings upturn of 33% and the stock's 50% or better rise above $24.

FRANK SLOAN

Firm: Rauscher Pierce Refsnes, Dallas, 800-677-2154 Age: 52 Rookie year: 1972 Clients: 200 Minimum: $100,000 Average: $300,000 Outlook: Anxious

Resume: Native of Odessa, Texas; graduate of the University of Texas; dedicated golfer with a 12 handicap; career broker

Clientele: Business owners and executives who appreciate Sloan's focus on companies based in Texas or the Southwest

Comment: "I read lots of Wall Street research on interesting firms in my backyard," says Sloan. "But I won't buy the stock until after I've completed my own grass-roots assessment." That includes interviews with a company's customers, competitors and mid-level management as well as top brass. Below, Sloan names three undervalued Texas stocks, each based in Dallas, that he says are poised to excel next year following a lackluster '96.

Picks for '97: Buy $90 million PC Service Source (PCSS; OTC, $8; no dividend), a pioneering independent in the $1.2 billion U.S. market for supplying spare parts for personal computers. Sloan says growing pains related to PCSS' doubling of revenues this year will cause profits to fall 20% short of analysts' estimates. Now that the problems have been corrected, he sees earnings at the company surging nearly 80% in '97 and the stock rising 75% to $14. Buy $12 billion Texas Instruments (TXN; NYSE, $54; 1.3%), which plans to auction off its defense-electronics business valued at about $2 billion. Sloan remains a fan of the company despite a forecast 67% slide in '96 profits greased by a 75% plunge in prices of memory chips, the firm's main business. Predicts Sloan: "Rebounding chip prices could boost TXN's depressed earnings upwards of 130% next year," elevating the stock 39% to $75. He also recommends buying $124 million Triton Energy (OIL; NYSE, $46; no dividend) before a major oil company swallows the exploration firm to gain control of its stakes in promising wells in Colombia and Thailand. What's oil stock worth? "At least $65, or about 40% more," says Sloan.