A Mixed Picture Of Growth

Perry Cabean's focus on economic trends couldn't produce picture-perfect gains

When money manager Perry Cabean weighed in with his Private Screening picks last year, he tried to focus on “the big picture” regarding the movement of the economy before he made his selections. Cabean, who helped supervise $18 billion in assets for Detroit-based Comerica Bank but has now moved on to another firm, said his team of managers focused “on five or so economic trends we feel will help drive good companies and good stocks over the next few years.” He also emphasized having a long-term time horizon that would give his growth-oriented selections time to flourish.

With the economic trend in the U.S. continuing downward through last year, Cabean’s five stock picks gave mixed results that produced an 11% loss during the 52-week period from April 11, 2002, to April 10, 2003. By contrast, the Dow Jones industrial average showed a 19.21% loss and the Standard & Poor’s 500 index dropped 21.03% over the same period.

Cabean’s selection of the Apollo Group (Nasdaq: APOL) produced a tremendous gain of 40.46%, primarily off the strength of its University of Phoenix subsidiary that provides correspondence courses on the Internet. The stock enjoyed a 3 for 2 split, climbing from a split-adjusted $36.75 to $51.62, and is expected to continue providing reliable earnings that have proven to be recession-proof.

Tenet Healthcare (NYSE: THC) also had a 3 for 2 stock split, but the hospital chain and healthcare provider did not improve its fortunes by expanding its services to patients as Cabean predicted. Instead the stock plummeted 68.20%, going from a split-adjusted $47.49 a share to $15.10. Comerica sold its position in the stock in November 2002 after several key executives left the company.

The Comerica team was right to suggest that companies that provide good values to consumers would do well in this volatile environment. Cabean’s pick of Avon Products (NYSE: AVP) with its popular line of cosmetics and toiletries produced a modest gain of 2.88%, inching up from $55.96 to $57.57. Its direct sales model and strong brand name keep it a leader in the industry.

Cabean’s selection of Pitney Bowes (NYSE: PBI), the maker of postal meters and other office machinery, was hurt by the continued economic slump. The company lost 21.29%, dropping from $42.22 to $33.23. However, the Comerica team believes Pitney Bowes’ dominance in its industry, huge market share, and solid dividend make it a stock to hold on to.

Finally, Alltel (NYSE: AT), the wireless and wire-line communications company, slipped 8.86%, going from $50.32 a share to $45.86. The Comerica team says it still has the potential to exceed most telecom providers.

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