- The Washington Times - Thursday, March 23, 2000

Small interest-rate rises haven't put a dent in stocks, notes the Economist. They may even have had the opposite effect. "So long as a buoyant stock market and rampant credit expansion continue to boost growth, it will take more than a few tiny rises to slow America's boom. Indeed, such timid moves may falsely reassure Wall Street that the Fed has everything under control, encouraging the market to even giddier heights."

Pilgrim International Small Cap Growth Fund's 42.4 percent average annual gain over the past three years makes it the top-performing fund in Morningstar's foreign-fund universe. Pilgrim limits its buying to the smallest 25 percent of foreign stocks, zeroing in on those with strong fundamentals and stronger than average growth due to sustainable positive changes.

Recent favorites: EM Television & Merchandising, Kinowelt Medien Ag., Kojima Iron Works, Kampo Ag. Com., Aiful, Hikari Tsushin.

The strong rebound in oil prices should help the oil service industry in the next year or two. If you want real investment action, says Forbes, pick a service stock with lots of operating leverage, or high fixed costs in proportion to revenue. "When revenue rises, earnings shoot up like a geyser." Forbes' favorites are three producers of steel pipe used in oil wells: Lone Star Technologies, Maverick Tube, Tubos de Acero de Mexico.

Screening for corporate efficiency can help investors ferret out future growth stocks. One reliable gauge of such efficiency, notes Dow Theory Forecasts (7412 Calumet Ave., Hammond, Ind. 46324) is a company's SGA expense ratio, the amount of money spent on selling and administration as a percentage of sales. Frugal companies are able to keep administrative overhead growing at rates below the growth rate of sales, which causes the SGA ratio to fall.

DTF's favorite low-SGA stocks: Avnet, Emerson Electric, Hewlett-Packard, Merck, Southwest Airlines, Superior Industries.

Most Wall Street analysts believe that junk bonds' healthy yields make them a significant bargain now. But there is junk and there is junk, advises Kiplinger's Personal Finance Magazine (1729 H St. NW, Washington, D.C. 20006). "Prospective junk-fund purchasers should call the funds' 800 number and ask what percentage of the portfolio's bonds are rated below B or are in default. No more than 10 percent of a junk fund's assets should be rated below B."

Twenty-eight different discount brokers now levy no fees for buying and selling a select list of mutual funds. But the number of funds offered by these brokers varies widely.

Here, according to the American Association of Individual Investors' Journal (625 N. Michigan Ave., Chicago, Ill. 60611) are the brokers that offer the most funds: Scudder Financial Services (7,976), National Discount Brokers (7,919), Waterhouse Securities (7,760), Accutrade (6,835). Of these, Waterhouse offers the most fund families (379) and the most no-load funds (1,419).

Twelve times since 1945 the Fed has initiated a higher interest-rate policy. Here, according to Standard & Poor's, are the stock groups that have performed best, on average, during these periods of rising rates: health care (up 5.6 percent), computer hardware (up 4.8 percent), personal care (up 3.5 percent), nonalcoholic beverages (up 3.1 percent), alcoholic beverages (up 3.1 percent).

Investor's notebook reflects the opinions of professionals. It does not recommend specific investments and no endorsement is implied or should be inferred. For more information, contact the companies cited.



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