Q–Last year you answered a reader’s question in which you said “earnings growth is a major factor in selecting a stock.” What industries look best in terms of earnings prospects for 1997?
A–One of the most volatile stock sectors is again expected to provide the strongest earnings power.
Wall Street analysts believe technology should provide earnings growth of 27 percent in 1997, versus last year’s 34 percent, said Charles Hill, director of research for the First Call Corp. research firm in Boston.
Consumer cylicals, such as automobiles, should rise 20 percent, he expects. Next in line will be industrial companies and consumer non-cyclicals, both pegged for 16 percent gain.
Within those large sectors will be pockets of singular success.
“Breaking it down by specific industries, precious metals is expected to have 113 percent earnings growth in 1997; toys, 76 percent; oil drilling, 70 percent; aluminum, 55 percent; and trucking, 51 percent,” said Hill.
Focusing on the broader picture, the analysts monitored by First Call expect 15 percent average earnings growth for Standard & Poor’s 500 companies next year, while smaller stocks in the Russell 2000 index should turn in a 35 percent gain.
Q–My husband and I are 38 years old. We have shares of Janus Growth & Income Fund. What’s your opinion?
A–Run by outstanding stock-picker Thomas Marsico since 1991, this fund has much to recommend it as a growth vehicle. The $1.1 billion Janus Growth & Income Fund was up 28 percent over the past 12 months to rank in the upper one-fifth of large-capitalization growth funds. Meanwhile, its three-year annualized return of 17 percent placed it in the upper quartile of its peers.
Top holdings were recently Lucent Technologies, IBM, Wells Fargo, UAL Corp., Nike Inc. (Class B), Cytec Industries, Cisco Systems, Citicorp, PepsiCo and General Electric. Heaviest weightings in its portfolio of 54 stocks and three bonds were financials, industrial cyclicals and services.
However, this fund is not necessarily for everyone, since it can suffer periods of volatility.
“Janus Growth & Income could be a core portfolio holding, but because its success depends primarily on the strength of the large-cap growth stocks, it’s not an all-weather fund,” counseled Christine Benz, associate analyst with the Morningstar Mutual Funds investment advisory. “It had a down period from 1992 through 1994, when its investing style was out of favor.”
This “no-load” (no initial sales charge) fund based in Denver requires a $2,500 minimum initial investment.
If you wish to be a bit more aggressive, Benz recommends the $431 million Janus Twenty Fund, up 34 percent in the past year to rank in the top 3 percent of growth funds. Run by the same manager, Marsico, since 1988, its three-year annualized return of 20 percent is in the top quartile of growth funds.
Q–What’s been happening with airline frequent-flier programs? Are there any new wrinkles?
A–You’ll be seeing most programs add an additional “elite” level for travelers logging 100,000 miles annually, in addition to their existing programs for 25,000 and 50,000 miles, said Randy Petersen, editor and publisher of Inside Flyer Magazine. This means more perks for those reaching higher levels.
Airlines in 1997 will also make it possible to redeem frequent-flier miles for hotel rooms, car rentals, magazine subscriptions and free telephone time, predicted Petersen, noting that thus far only American Airlines has taken this step.
“In 1997, you’ll also see most programs go to paperless electronic ticketing for all their awards, meaning the reward will simply be waiting for you at the airport,” added Petersen. Finally, the Internet will have greater impact on frequent flying, he believes. A few carriers currently offer special airfare deals on the Internet, but this will be expanded.
An annual subscription to the monthly Frequent Flyer, 4715-C Town Center Drive, Colorado Springs, Colo. 80916, is $36.
———-
Andrew Leckey, whose new book “The Morningstar Approach to Investing: Wiring into the Mutual Fund Revolution” (Warner Books) is now in bookstores, answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450.
