Q–I know how everybody gets so excited during corporate earnings reporting periods. Now I’d like to know which stocks receive the most recommendations from Wall Street now that so many numbers are already out for the past quarter.
A–Technology, despite its volatility, and health-care stocks remain featured choices among investment analysts, just as they were during much of 1996.
The most recommended stock of all is Cisco Systems Inc., with 26 “strong buys” and 11 “buys,” according to the I/B/E/S International research firm.
3Com Corp. and Intel Corp. tie for second place with 19 strong buys and nine buys apiece, while Norwest Corp. is third with 18 strong buys and nine buys. Columbia/HCA Healthcare ranks high with 21 strong buys and five buys.
Following in popularity are Compaq Computer, Amgen, Home Depot, Microsoft, Oracle and Pfizer.
Q–I’ve always wondered about this. What’s the difference between a balanced mutual fund and an asset allocation mutual fund?
A–Though often mentioned in the same breath, these funds are two distinct breeds of cat. One offers few surprises, while the other can be more unpredictable.
A balanced fund generally has a set level for stocks, bonds and cash, such as a mix of 60 percent stocks, 30 percent bonds and 10 percent cash.
An asset allocation fund, on the other hand, has greater flexibility in shifting money across various asset classes in order to focus on its total return. This latitude of investment makes the choice of portfolio manager extremely important and requires that you keep up with its portfolio moves.
For example, the giant fund Fidelity Asset Manager recently had 53 percent of portfolio in stocks, 34 percent in bonds and 13 percent in cash. Six months earlier, it had 49 percent in stocks, 30 percent in bonds and 21 percent in cash. At the same time, the portion of its portfolio devoted to foreign stocks dwindled from nearly 19 percent six months ago to around 11 percent.
“Since the balanced fund is going to stay with a set formula for stocks, bonds and cash, you most likely use it to accomplish some diversification to deal with various different markets,” explained Jon Teall, research coordinator for Lipper Analytical Services. “But the asset allocation fund, by seeking out a higher return, will generally be more aggressive and have higher risk.”
Teall noted that balanced funds, actually the oldest type of fund, are often recommended as the very first fund an investor should buy. They currently hold $94 billion in assets, compared to $35 billion for asset allocation funds.
Q–I am interested in Gabelli Growth Fund. Would it be a good investment choice?
A–It’s quite basic and trustworthy.
The $560 million Gabelli Growth Fund is up 20 percent over the past 12 months to rank in the top one-third of growth funds. Its three-year annualized return of 14.58 percent is in the upper half of its peers.
Howard Ward, who began managing it early this year after a dozen years as a managing director at Scudder, Stevens & Clark, follows founder Mario Gabelli’s philosophy of finding solid but undervalued companies with good franchises. The portfolio is filled with larger-sized value and growth stocks, and has most recently emphasized groups such as financials, cyclicals, technology and health care.
The largest stock holdings recently included Home Depot, First Data Corp., General Electric, Wells Fargo, Gillette, State Street Bank of Boston, Mellon Bank, Molex Inc., Nabisco Holdings and Electronic Data Systems.
“Ward has been a theme-oriented manager throughout his career, picking a theme such as infrastructure or the aging population and then buying companies that would benefit from it,” explained Mark Wright, analyst with the Morningstar Mutual Funds investment advisory. “This basic growth fund is a core holding, and a fine active-managed alternative to an index fund such as the Vanguard Index 500.”
This “no-load” (no initial sales charge) fund based in Rye, N.Y., requires a $1,000 minimum initial investment.
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Andrew Leckey, who co-anchors the two-hour “Today’s Business” program each weekday morning on the CNBC cable television network, answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450.
