Which Way Is Up?

Our experts discuss strategies to thrive no matter what the market brings

29% growth rate versus about 10 for the market. First Data Corp. is the biggest payment processor for credit card transactions in world. The company is a direct play on the cashless society of the future; they issue credit cards and work closely with some of the biggest retailers around, with Sears and WalMart among their clients. They also have contracts with 24 of the top 50 bankcard issuers.

We like General Electric (NYSE: GE), an example of a large cap stock with growth potential. It’s actually the largest market cap company in the market, but one we think can grow at a 13%-14% rate. The phenomena that are driving its growth reflect themes that are propelling the U.S. economy. One, for example, is globalization–expanding markets overseas– something GE’s always pressed. When we talk about technological enhancement, GE is very active in that, too. The company is well managed and focused on cutting costs. Plus, it has close to $7 billion in cash, so a share repurchase plan or acquisition could be in order. Meanwhile, the stock yields about 1.5%.

Another company would be General Nutrition (Nasdaq: GNCI). The company owns about 1,300 stores in malls far and wide. It also has franchises. They are the No. 1 seller of dietary supplements and also manufacture their own private brand of health supplements and vitamins and herbal c
omponents. Over the last five years, the company has grown at about 52%. Over the last 12 months, we have seen 24% earnings growth and it is estimated to grow at about 20%, going forward. It has a P/E of about 27.

ROBERT LAMB: We’re focusing on broad themes: outsourcing; computer networking and database management; managed care and cost containment; global trade and telecommunications; leisure and retirement planning; privatization and deregulation; financial empowerment; biogenetic engineering; resourced management; and virtual reality.

Starting off with computers, the first is a small company, Metacreations (Nasdaq: MCRE), which makes the software for 2-D and 3-D graphic representations on computers. This technology is used in the entertainment field, construction, engineering and finance. The company typically trades on a P/E between 30-44. Right now it’s about 35. We see long-term earnings growth of 25%-30% for them.
We also like Cisco Systems (Nasdaq: CSCO), which is the pre-eminent supplier of Internet networking equipment. I like the fact that they get about 40%50% of their sales overseas, mostly in Europe, Canada and the Pacific rim. The P/E is in the mid-30s. It typically trades between 25- 38 on a P/E basis.

In leisure and retirement, we like Cutter & Buck (Nasdaq: CBUK), which makes high-end sportswear, particularly golf shirts. We’re hoping that the company can ride the Tiger Woods phenomenon. The stock trades at a P/E in the low 20s. In fiscal 1997 they earned 77 cents a share. We’re expecting $1 a share in 1998.

My final choice is Charles Schwab (NYSE: SCH). Here’s a company that’s blurring the lines in finance, blending things that Citibank or a Merrill Lynch does with services provided by American Express

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