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Fund Managers Bargain Hunt Amid Carnage

Wall St.: Health-care and cable stocks are snapped up in midst of Nasdaq's plunge and concern over the election.

November 11, 2000|JOSH FRIEDMAN | TIMES STAFF WRITER

Amid the market's continuing carnage, some money managers say there are plenty of good stocks to buy--if you can take a longer-term view.

"The market looks ugly right now, but this won't last forever," Howard Ward, manager of the Gabelli Growth fund, said after the Nasdaq composite index slumped more than 5% Friday and the Dow Jones industrial average lost 2.1%. "Long-term investors have to be salivating."

Of course, there's no guarantee that buying on this drop will be rewarded near term. Between high energy prices, weaker corporate earnings growth and Mideast violence, things look a lot different than in market setbacks of recent years--even without the presidential election confusion.

Although the election mess could be resolved in the next week or so, money managers say uncertainty over the slowing economy poses more of a real risk and is likely to take longer to play out.

"The backdrop isn't all that favorable for the broad market. We've seen continued evidence of that with the likes of Dell Computer coming out and saying, in effect, 'Don't expect much growth,' " said Tim Ghriskey, manager of the Dreyfus Aggressive Value fund.

He said technology stocks are still steeply valued, even after the Nasdaq index's 40% plunge since spring. "You don't want to catch falling knives these days, especially in tech land," he said.

So, what are managers buying?

Ghriskey, for one, has made a bet on a White House victory by George W. Bush, who is expected to keep his hands off the pharmaceutical and HMO industries.

"On Wednesday we began buying much more into the health-care sector," Ghriskey said, adding that he would quickly rethink that strategy if the tide were to turn to Al Gore.

Ann Miletti, associate manager of the Strong Opportunity and Common Stock funds, said she is eyeing the cable TV sector because it is seen as recession-resistant, much like the drug sector.

Even if the tech sector is raining knives, some of those stocks are too cheap to pass up, fund managers said.

"We're buying Cisco Systems here at the $50 mark, and adding to some other core holdings, such as America Online and Viacom," said Larry Puglia, manager of T. Rowe Price Blue Chip Growth.

Gabelli's Ward said he was busy Friday adding to his stakes in Dell, Cisco, Nortel Networks and Corning as they sank.

Miletti said she has bought several stocks that have dipped: CNet Networks, the Internet content provider; Getty Images, which sells pictures to magazines and other users; and Watson Pharmaceuticals. Because Watson makes proprietary as well as generic drugs, she calls the stock a win-win situation whether the White House goes to Bush or Gore.

Jim Oberweis Jr., manager of Oberweis Mid-Cap fund, said he has been nibbling at telecom equipment makers Aware and Tollgrade Communications, both now priced at less than half their 52-week highs. "With a lot of smaller names, valuations have come down to the point where the risk/reward ratio is compelling," he said.

Bill Koehler, who heads the investment oversight committee at American Century Investments, said he has been doing what he would recommend individuals do--ignoring the political wrangling and using fundamental research to find bargains. "We're not sitting around trying to get a handle on what's happening in the courtrooms of Palm Beach," he said.

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STOCK SELL-OFF

Profit fears, election stalemate send Nasdaq, Dow tumbling. A1

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The Split Market

Technology stocks continued to be hammered Friday, driving the Nasdaq composite index down 5.4% to 3,028.99--a decline of 40% from its March peak. But the blue-chip Standard & Poor's 500 index, while off 2.4% on Friday, is down less than 11% from its March peak.

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Nasdaq is in a deep bear market ...

Monthly closes and latest

Friday: 3,028.99, down 171.36

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... but the S&P 500 is hanging tough.

Monthly closes and latest

Friday: 1,365.98, down 34.16

Source: Bloomberg News

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