Good stock-buying opportunities almost always occur when the market is oversold, investors are extremely pessimistic, insiders are buying, the public is selling and technical indicators appear very oversold but are turning up. Today's conditions could not be more different, says Sy Harding's Street Smart Report newsletter (505 E. New York Ave., Deland, FL 32724). "Investors are displaying extremes of complacency and euphoria, insiders are selling at a record pace, and our intermediate-term technical indicators are very overbought."Ariel Fund investors get to make money and feel righteous about themselves, too. A "socially conscious" fund, Ariel avoids investments in alcohol, defense, gambling, tobacco and other controversial sectors. Yet it has still produced 12.5 percent average annual gains over the past decade. It's done this by focusing on smaller, value-oriented growth stocks with strong managements and consistently high returns in stable niches. Recent favorites: AGC, Grey Global Group, Lee Enterprises, Markel, ServiceMaster.
The last recession took its toll on the temporary-help industry. From their peak in 2000, temporary staffing jobs had fallen 28 percent by 2002. But as the economy picks up, the temp industry should benefit, says The Turnaround Letter (225 Friend St., Boston, MA 02114). "Most temp stocks are still well off their five-year highs. We also like the industry's low price-to-sales ratios and clean balance sheets." TL's favorite temp stocks: AMN Healthcare, Kelly Services, Manpower, MPS, Robert Half International, Wireless Facilities.
All investors want their growth prospects to come with moderate risk. So Value Line (220 E. 42nd St., New York, NY 10017) recently screened its entire stock universe for companies whose share prices have compounded at least 15 percent annually over the past five years and seem set to continue rising at near that pace. VL addressed safety concerns by demanding safety ratings of at least 3 (average), financial strength ratings of B plus or better, and scores of 65 or higher on its price stability index. It found seven such stocks it believes can double in the next five years: AmerisourceBergen, Cardinal Health, Coors, Harley-Davidson, Kohl's, Pfizer, Synovus Financial.
Any municipal authority can theoretically default, as Washington state's public power system did in the 1980s. Municipal bond investors can protect themselves by sticking to insured bonds, says Kiplinger's Personal Finance Magazine (1729 H St. NW, Washington, DC 20006). "Their insurance guarantees timely payments of principal and interest, but doesn't guard against price moves. It's not free, so insured bonds usually yield less than similar uninsured bonds."
The lowering of federal tax rates on stock dividends has sent investors stampeding into closed-end funds that specialize in high-yielding preferred stocks. But not all closed-end preferred funds are created equal, cautions Wachovia analyst Mariana Bush. "Many invest in what are called 'dividends received deduction' stocks. These increasingly prevalent shares allow companies to write off their dividends as interest, so they don't qualify for the tax cut."
Site of the Week: Check out www.bigcharts.com, a free site for stock-market technicians that offers a high level of flexibility for creating charts, including time-period covered, frequency, price display, chart size and more than 20 technical indicators.
Investor's Notebook is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.