Make Reality Check As Indexes Extend Records Brokerages Issue Lists Of Stocks Expected To Outperform Market
Before vacations and other distractions take hold for the summer, take some for a mid-year financial check-up.
For the record, the stock market, as measured by all the major indexes, ran up some strong numbers in the second quarter, after a sluggish first three months of the year.
The Dow Jones industrial average climbed 18.99 percent over the first six months, with 16.55 percent of that gain coming in the second quarter. The Dow - the market’s most widely followed indicator - already has set 28 new closing highs this year. In all of last year, it reached a new high 44 times, rising 26 percent for the year.
The Standard & Poor’s 500 stock index was up 19.49 in the first half of 1997, showing a robust gain of 16.91 percent in the second quarter.
The more volatile NASDAQ index rose 11.70 percent in the first six months, compared with a small decline in the first quarter.
But before investors become too giddy over the 1,200-point gain in the Dow thus far this year, they need to recall July 1996, when the stock market suffered staggering losses. Or more recently, the four-week period ended April 11, when the Dow dropped nearly 10 percent - the sharpest decline in more than six years.
While the market has certainly bounced back in fine style since then, the lesson to be learned from last July and the first quarter is that those looking for quick profits can get burned even in an overall rising market.
On the plus side of the ledger, the market’s overall 19 percent gain comes at a time when most investors would have been pleased with a 10 percent gain - at year’s end.
After sizing up the market’s first-half performance, the question individual investors must ask is, did their stocks and mutual funds keep pace with the major indexes and if not, why not?
The good news is that if you’re looking for new investment ideas, there’s no shortage of buy recommendations these days.
Among the more widely watched investment lists this time of year is Lehman Brothers’ annual selection of what it terms “10 Uncommon Values.”
Its selections this year include Adaptec, America Online, Boeing, Peoplesoft, Quintiles Transnational Corp., Safeway, Sonoco Products, Southwest Airlines, and Washington Mutual Inc.
Lehman has released its list of value stocks every year since 1949. Last year’s best bets gained an average 36.5 percent in the last 12 months. In the same period, the Dow rose 34 percent.
Not to be outdone, Smith Barney put out its list of attractive stocks. Its favorites include Avon Products, Cisco Systems, Dresser Industries, Duke Energy, First Bank Systems, Mirage Resorts, Monsanto, Motorola, Philip Morris, Textron, Wal-Mart, Warner-Lambert and Williams Cos.