Optimists Flock to Brokerage to Buy Stock at Bargain Prices
Call them Pollyannas, but some investors were snapping up what they saw as big bargains in the stock market’s day-after fire sale.
“The market’s going to go up again; I have confidence in this country,” said Canadian-born Martin Raft, a Los Angeles apparel executive who bought $35,000 worth of shares in Ford, IBM, Black & Decker, Exxon and other high-profile stocks at bargain-basement prices Tuesday morning.
“The intrinsic values are still there. The market’s going crazy because of outside conditions.”
The story was much the same among a stream of would-be investors--some first-timers--who provided steady business at the counter of Fidelity Investments’ downtown office.
Although a few customers cashed out of the company’s mutual funds, others opened accounts with the company’s discount brokerage side so that they could buy shares at depressed prices. Fidelity Investments is the nation’s largest mutual fund organization and the second-largest discount brokerage, after Charles Schwab & Co.
“I think there are opportunities here,” said Beverly Thelander, 32, a financial consultant at Atlantic Richfield Co., who was buying shares of her company’s stock. She did, however, acknowledge that Monday’s 508-point dive “doesn’t bode well” for the economy.
Time to Jump In
Brigid Newton, 24, was buying her first shares ever--and she was starting with the mother of them all--American Telephone & Telegraph. An Orange County resident who works at the Los Angeles Athletic Club, Newton decided with her husband to “buy low” to bolster their investment in a Fidelity cash-reserve fund.
“I just feel the economy as a whole, when you separate it from the stock market, is still strong,” she said. “It’s a good time to jump in.”
To Russ Richer, it was more a case of jumping ship. He was setting up a wire transfer that would take the funds out of a Fidelity mutual stock fund and put them into his bank account. Even though he expected to lose $2,000 or so on the transaction, he figured the market is “too unstable.”
“It’s a global situation,” said Richer, 40, a former construction worker who lives in Redondo Beach. “Confidence has been eroded, and the small investor will be running for his life.”
Buyers resurfaced Tuesday after being far outweighed by sellers the day before. Lisa Swaiman, a Fidelity spokeswoman, said most investors were moving away from aggressive growth stock funds and “toward (the) conservatism” of money-market funds, particularly those that invest in government securities.
The same was true at other mutual funds, according to Erick Kanter, a spokesman for a Washington-based trade group, the Investment Company Institute. “I think there’s a general perception still that mutual fund is synonymous with stock,” he said, adding that only about one-quarter of the industry’s assets are in stocks.
Throughout the day, three Fidelity representatives patiently answered questions from customers, beginning with a line of people who were waiting when the office opened at 8 a.m. Many clients complained that they had been unable to get through on the company’s toll-free number.
Many customers were frustrated because the market’s overworked computer system was behind by nearly two hours on price quotations. As a result, many investors were “buying blind” and would not find out what price they would be paying until much later in the day.
Nervously eyeing two clocks moving toward the hour marking the close of trading in New York, Regina O’Neill, 37, of Santa Monica waited impatiently on the telephone to get through to Fidelity’s headquarters office in Boston to sell shares in a fund.
“We just made it!” she gleefully told her husband, Richard, an executive with the Chiat/Day advertising firm.
“We’ve made a lot of money since 1982 in the market,” Richard O’Neill said, adding that they will use the proceeds of Tuesday’s sale to cover the purchases of bond funds and common stocks. “Now, we’re trying to protect it by diversifying.”
Most of the activity in the company’s mutual fund and discount brokerage business was being conducted by phone, Swaiman said.
Most investors, Swaiman added, were soothed by the realization that the fund has enough cash on hand to meet redemptions. Many, in fact, “just wanted to be reassured,” she said. Clients who chose to cash out of stock funds were told that they would get checks in about five business days.
Some Fidelity investors benefited from a policy change that went into effect at the beginning of last week, just days before the debacle. Under that program, clients could sell shares through the discount brokerage at no charge if they used the proceeds to diversify into a “load” mutual fund that required a commission.
“There was a feeling at Fidelity,” Swaiman said, “that small investors might want to diversify.”
