20 - MANCHESTER HERALD, Tuosduy, Nov. 8, 1383 'N.- BUSINESS Coventry wins big upset Dory Alderman’s Bolton OKs In soccer tournament kitchen’s crowded backhoe funds Stock market outlook: watch out in months ahead ... page 9 page 13 ... page 21 Look for a choppy, sideways, treacherous stock is especially bullish. Obviously, given its concerns The big stock play, ps the two oi^n see it, are the big market the next few months with the Dow sliding to about a “choppy, sideways market” the next few quality names, such as Anheus^ Busch, Kodak, the 1150-1200 area. And then —pow. A powerful second months, it's playing things more cautiously. General Dynamics, McDonald's Westinghouse, leg of the bull market will get under way that should Southern California Edison, Syntex and Pillsbury. propel the Dow to around 1400 before year-end '84. Dan Dorfman HCM’S CHIEF near-term concerns; Normally at this stage of the market you look at the The market's best bet over the next 12 months — the • Strong market worries about the rate of economic cyclicals and the secondary stocks, Hagerman tells Manchester, Conn. seemingly "boring” stocks. These are the large, Syndicated improvement. A lot of pros fear that the high interest me, but we think thequality names are better because Becoming cloudy tonight; well-capitalized quality names — the steady growers, rates could slow the economy or throw us back into a they’re just as cheap. * Wednesday, Nov. 9, 1983 many of which are pretty cheap based on '84 earnings Columnist recession in early to mid-'84 (a view not shared by rain developing Thursday prospects. HCM). = HERE'S A BRIEF rundown on HCM’s three top^ Single copy: 25<t Three top choices — each of which has the potential • The strong competitive threat to stocks from high stock picks for the next year: — See page 2,. to turn in a snappy 30 to 50 percent again over the next bond yields. At present, the yield on 10-year A.H. Robins (the top choice): Priced at $27, it’s' fEanrljrHlpr year: A.H. Robins, UAL and Firestone Tire & Rubber. government bonds is close to 11 percent; the yield on viewed as the cheapest drug stock around, based on its; ’".'t "It's called disciplined diversification,” says. stocks, only about 4 percent (Which is also the rate of above-average profit growth rate (over 20 percent a-^ THESE ARE THE VIEWS of a couple of fellas with Clayton. "We’d rather be wrong on an individual inflation). year) and its low price-earnings multiple (9.5) on' a pretty snazzy investment record — Pete Hagerman company than wrong on 40 percent of an account • The prospects of a larger-than-expected number estimated '84 profits of $2.85 a share. and Bill Clayton, directors of Hutton Capital because of excessive representation in any one of earnings disappointments (both among weaker The HCM view is that the tow p-e reflects the- Management. industry." companies and biggies) as a result of the recessionary company's long-standing battles over the DalkonT HCM, a subsidiary of E.F. Hutton, manages $650 effects and high interest rates — plus the strong dollar Shield — the birth control device that caused' million — 85 percent of which is pension and MANY FUND MANAGERS take a "top-down " (which hurts overseas business and encourages problems and led to a slew of lawsuits. As a result of^ profit-sharing funds; the rest, individuals. Clients approach to the market — in effect, you set an cheaper imports). favorable court decisions, HCM believes that the^ Democrats retain control of town include Chrysler, Royal Crown, Litton Industries, economic framework and then determine what "We could have more Digital Equipments," says firm’s product liability insurance will cover much ofj Kidde and the University of San Francisco. Minimum industries to focus on. Hagerman — a reference to the big fast drop in the the potential liabilities. And so the big reason for the-; investment is $1 million. "Everyone does it, but we think it's risky,” says minicomputer kingpin’s shares (over 30 points) in the stock being so cheap, Hagerman says, may ho longer Over the ’79-'82 period, HCM racked up nearly a 22 Hagerman, “because there's a danger of overweight­ face of a worse-than-expected profit showing. be a good reason. percent annual gain, versus a 16 percent yearly rise in ing your portfolio in a given sector. And what happens Clayton hastened to point to the turmoil in Beirut UAL (the second choice): Priced at $30, it’s a bet* Republicans gain the Standard & Poor's 500-stock index. It was up just if you're wrong?” and Grenada as obvious market worries. The that the depressed airline industry will turn around.' over 30 percent last year, compared with an S&P The effects of putting limited amounts of money in question, he says, is: "How committed are we?” UAL is viewed as well-managed, financially strong index rise of 22 percent. In the first nine months of this any one industry are dramatically illustrated in and has a leveraged balance sheet that,could produce school board seat year, it trailed the market a bit — turning in a 17-18 i HCM’s '80 and '81 results. THESE NEAR-TERM worries, though, are ex­ a bigger than average earnings gain, given a percent advance, vs. a 22 percent rise in the S&P In '80 when energy was the rage, HCM posted a 21 pected by both Clayton and Hagerman to give way to continued peppy economy and improving airline, By Alex Glrelll index. percent gain. On the face of it, that’s not bad. But since what they believe will be a strong resumption of the traffic. Herald CItv Editor A chat with Clayton and Hagerman is particularly the S&P index was heavily weighted in energy bull market in '84. The stock sells at just under eight times HCM's 9 relevant at this point, since their investment record companies, HCM badly lagged the S&P advance that They reason that the economic recovery will estimated '84 earnings of $4 a share and Hagerman' Democrats elected all six of their candidates to the shows a consistent ability to outperform the market in year of almost 33 percent. continue at an orderly pace (HCM is projecting a 4.7 tells me, "We think the discount air fares are probably^ Board of Directors in Tuesday’s election, retaining down periods. In '81, though the energy play came acropper. and percent gain in '84 real GNP and a 26 percent advance at the bottom of the cycle.” . T clear control of the town’s legislative body, but they Granted the Dow is not too far away from its the S&P index suffered a 5 percent drop for the year. in the year’s profits). Firestone "Tire & Rubber (third favorite): Selling at" lost one^at on the Board of Education. all-time high — but since mid-June many stocks have HCM, on the other hand, turned in an '81 rise of over 13 Moreover, they see a subdued rate of infiation — to $21, the company — which sports a multiple of 6.7? Republicans were thwarted in theireffort to weaken been butchered, wiping away substantial amounts of percent. the point, Hagerman says, where that huge 7 percent based on estimated '84 profits of $3.15 a share — is - the 6-3 Democratic majority by a 439-vote margin, the - the bull-market gains. And currently market Clearly, a policy of trying to minimize risk is paying gap between bond and stock yields will shrink to- regarded as a major beneficiary of surging auto sales. I difference in the lowest vote for a Democratic victor, uncertainty and nervousness are rampant. off for HCM. maybe 4 to 5 percent, thus enhancing,the appeal of The company is also viewed as a "special situation"? 6,058, and the highest vote of a Republican loser, 5,619. The HCM strategy is simple. It puts an equal dollar Right now, the average HCM account is about 7.0 equities. — given its purchase otthe J.C. Penney auto outlets* Voters at the same time rejected a $20 million bond amount in just about every stock it buys andtit never percent in equities, though it has been as high as 80 Another big plus; increasing productivity and more (the nucleus of which is intended to be a nationwide^ issue for sewage treatment plant modification, 5,541 buys more than two companies in any one industry. percent in stocks when the money management firm realistic wage hikes. chain of auto service centers). —' to 3,829. They approved a $695,000 bond issue for repair of Union Pond dam and construction of a I hydroelectric generation facility on the dam by a vote Corporate Intelligence of 6,458 to 2,943. The three Republicans who won seats on the Board of Directors were William J. Diana and Peter DiRosa Jr., incumbents, and Donna R. Mercier. The six winning Democratic candidates were Firm makes a business Stephen T. Cassano. Eleanor D, Coljman, James F. Fogarty, Stephen T. Penny, Kenneth N. Tedford and Barbara B. Weinberg. All except Mrs. Coltman are incumbents. Those nine will make up the new board, which will of nosing around business hold an organizational meeting Nov.21. The high vote-getter among the Democratic board By Steven W. Syre Beyond information provided by media, ads or candidates was Mrs. Weinberg and, if tradition is United Press International promotions, much of the research relies on people in followed, she will be elected major.