Waiting On the Blue Chips

Gordon Bell's large-cap selections are slow to recover

Last year, Gordon P. Bell, CFA, portfolio manager and director of Private Portfolio Group Smith Barney Asset Management, a division of Salomon Smith Barney Inc. and part of Citigroup Asset Management, looked for large-cap giants to weather the markets’ gyrations and produce profits. While he believes that all of his Private Screening picks will be great over the long haul, they were down 33.81% last year.

“The overarching reason for the poor performance is the nature of the markets. We have a bonafide recession going on, people are making less money, and corporate profitability has certainly suffered significantly, which brings down stock prices,” says Bell.

In spite of the poor returns, Bell has retained all of his selections in his portfolio at Smith Barney save one – Solectron (NYSE: SLR). He says the electronic component manufacturer was “a disappointment” because it failed to capitalize on its ability to produce some of the cheapest computer chips in the industry last year. Slipping from $37.90 to $11.65 a 69.26% loss, Bell still believes Solectron “has the best strategy out there,” but its profitability will take more time to materialize.

Bell is still high on Liberty Media Group (NYSE: L) because of its CEO, John Malone. “With his AT&T connections, he’s going to be able to do deals on his own,” says Bell. Although the media company fell 12.28% from $15.88 to $13.93 in Bell believes it is well-positioned to build value in the future.

Comcast (Nasdaq: CMCSK), the cable television provider, which slipped 14.56% from last year, is still in good position to jumpstart revenues. Although the firm fell from $43.69 to $37.33 Bell says it will probably offer more services, such as high-speed Internet via broadband, telephone service, and video-on-demand.

Bell says Nokia (NYSE: NOK) was one of only two companies to make money in the cellular phone business in 2001. “The market was down last year, yet Nokia’s market share is even higher now,” he says. The stock fell 44.88%, from $41.38 to $22.81 since his recommendation, but Bell feels the company’s market dominance bodes well for its future performance.

As for J.P. Morgan Chase & Co. (NYSE: JPM), Bell simply says, “Nothing else can go wrong. They’ve had Argentina, which cost them billions of dollars, they’ve had Enron, which cost them billions of dollars4they’ve survived all that, plus the pain and agony of a merger.” He points out that even though the stock price had dropped 38.08% from $53.31 to $38.34 in January, it continues to pay a strong dividend. “They are absolutely a world-class company.”

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