How To Survive In A Volatile Stock Market

Until the market slowed, a bang-up start to 1998 had investors eager for more. Our experts map out what to expect now.

a return of 18% annually over the next four years, he says.

DAWNA EDWARDS
Dawna Edwards isn’t your typical “what-have-you-done-for-melately” growth manager, the kind who’s looking for companies that have recently logged a sizable spurt in profits. Instead, she’s after consistency. For Edwards, a principal with the Detroit-based institutional money management firm Alpha Capital Management Inc., 800-968-1870 that means corporations that have shown they can grow earnings steadily and dependably for at least five years.

One company that fits Edwards’ bill is Newell (NYSE: NWL), which makes houseware products, such as Pyrex cookware; office products, including Stuart Hall school supplies and Rolodexes; and hardware and home furnishing products, like Kirsch window treatments. Edwards says the company has posted a very reliable 14% earnings growth rate on average for the past five years.

Edwards is also keen on retailer Home Depot (NYSE: HD), the nation’s largest home improvement chain. With interest rates low and employment high, Edwards says, many folks are looking to put their money where their home is. Although shares trade at a price-to-earnings ratio of 43, Edwards says the stock has earned something of a premium if only because it has averaged growth of 23% annually over the last five years.

Edwards’ last pick is Automate Data Processing (NYSE: AUD), a provider of data processing and computing services, including payroll processing. One-third of all employers use a service bureau to outsource the payroll function, and this number is expected to increase due to year 2000 compliance issues. The company should benefit from this growth. Another plus: it has seen 36 straight years of double-digit earnings growth, Edwards says. While there’s no guarantee that this will continue, the consistency of earnings growth and the quality of the balance sheet make the company an attractive holding.

William Roach Jr.
It’s years like 1998 when William Roach’s take on international investing pays off. Globalt Group Inc., the Atlanta money management firm where Roach serves as a partner, taps domestic companies, provided they earn a major portion of their revenues from business overseas. That’s helped Roach’s institutional and mutual fund portfolio (877-289-4769, www.globalt.com) fatten from a run-up in U.S. stock prices, while sheltering it from the storm caused by Asia’s problems. Longer term, the strategy has returned Globalt, which manages $1.5 billion in assets, a 22.7% yield annually for the last seven and one-half years, compared to 20.9% for the S&P 500.

Roach’s first pick, financial services giant Morgan Stanley Dean Witter (NYSE: MWD), derives 28% of its revenues abroad. With demand for asset management services on the rise, Roach figures Morgan is good for a 16% average annual earnings growth. The stock currently trades at a price-to-earnings multiple of 19.

Roach likes Monsanto (NYSE: MTC), which transformed itself from a chemical company to a firm that spans agricultural chemicals, food ingredients and pharmaceuticals. Also, a recent merger with American Home Products will boost research and development. Roach says Monsanto, which bags 42% of its revenues overseas, should grow earnings at an 18% annual rate.

The scarcity of water should prove

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