Preserving Your Portfolio

It seems almost everyone has benefited from the long-awaited recovery that propelled the advance of the financial markets in 2003. The 28.28% returns logged by the dow jones industrial average and the 50.01% returns of the nasdaq market index reminded us of the double-digit gains that many people became accustomed to during the go-go ’90s. But if you were lucky enough to recover some of what you lost during the last three years of less-than-stellar market performance, what do you do now to preserve it?

We assembled four top-flight money managers to evaluate the current market rebound and provide strategies investors can use to protect their principal while outperforming the markets in 2004. The members of our roundtable included Stephen Coleman, chief investment officer at Daedalus Capital, a 10-year-old, St. Louis-based investment firm that manages $40 million in equity-only portfolios; Valerie Mosley Diamond, fixed-income portfolio manager with Boston-based Wellington Management Co., who oversees a $9 billion portfolio within Wellington’s $330 billion in assets; Drake Craig, principal at 2-year-old Atlanta Life Investment Advisors, (the investment arm of Atlanta Life Financial Group Inc., ranked No. 3 on the BE INSURANCE COMPANIES list with $99.9 million in assets) which manages about $58 million in assets in a large-cap core, and an international portfolio; and Derek Batts, chief investment officer and president of Detroit-based Union Heritage, which manages a large-cap value portfolio of about $250 million for several institutional clients.

BLACK ENTERPRISE: What is your market outlook for 2004?

COLEMAN: As I look out the next three to five years, I think that the world is going to be very, very good for equity investors. If pressed, I would say that between now and the election, it should be very smooth.

CRAIG: In terms of my outlook for 2004, it’s an election year and, generally, that spells good things. I think economically, we will see pretty strong growth because GDP numbers are attractive and inflation numbers are low.

BATTS: For 2004, we’re cautiously optimistic. We believe that some of the elements are in place for continued growth. Business investment is starting to pickup; we look at the competitive nature of the dollar and how it’s driving exports, and inflation seems under control. So we are cautiously optimistic.

DIAMOND: In terms of outlook, our view is that equity should do fine. Corporate bonds will do particularly well. High yield bonds, I think, will do well. I must point out, however, that for the last 20 years we’ve been in a steady decline of interest rates. And looking out, we are going to see the mirror image of that trend so, as interest rates rise, I would not be in U.S. Treasury Bonds, going forward.

B.E.: Are we in a bull market that will be sustained or are we likely to see continued market volatility during 2004?

CRAIG: We’ve gone through a profits recession over the last couple of years. Companies have been put in a position where they have had to wring out excesses. I think the type of earnings growth that