No Buying on the Dip in This Market Decline, Pros Say
At least some investment pros who profited by purchasing stocks on the heels of last October’s market drop are less certain that Friday’s 71-point decline in the Dow represents a buying opportunity.
“This is not similar. It’s not a disaster, but it’s not the same,” said Bill Harnisch, managing director of New York-based Forstmann-Leff Associates, which manages about $4.5 billion of investors’ funds.
Last fall, Business Week’s “Inside Wall Street” column cited Harnisch as a wily investor who sat out an earlier market rally, then moved immediately after October’s “Friday the 13th” drop to buy $200 million in previously overpriced equities, including Eli Lilly, Bristol-Myers Squibb, Apple Computer and MCI Communications.
Forstman-Leff profited handsomely from many of those stocks, and the optimism of like-minded investors helped the market to snap back quickly.
This time around, however, Harnisch said he has been only a “small buyer,” because he doesn’t see fundamental values in a market that had peaked only last week at a record 2,810.15 on the Dow.
Another big investor among those cited in the Business Week column as having executed a similar “buy on the dip” strategy last October also said he was taking a more cautious stance this time.
“What’s happening is different. It’s more global. The Japanese market is weakening, and there are real fears about how Gorbachev’s doing. Is he going to be around?” said the investor, who declined to be identified.
He added: “I’m going to watch the news over the weekend and wait for the foreign markets to open. I’ll let them make my decision for me.” (The Tokyo Stock Exchange will be closed Monday for a Japanese holiday.)
At a pair of Los Angeles-area brokerage offices, executives said there was no evidence that small investors had tried to capitalize on the market’s by-now familiar pattern of volatility by buying into Friday’s dip.
“Buying? From what I know, there’s been none,” said Neil Stewart, head of Dean Witter’s Santa Monica office.
Barak Tanzer, an investment executive in Paine Webber’s Beverly Hills office, contended that the 1987 crash had taught smaller investors to wait for signs of upward motion before buying.
“They realize there are some great opportunities, but they wait for a trend,” Tanzer said.
Still, Costa Mesa-based Newport Securities’ Jeffrey Kirkpatrick, one of the more vocal bulls following last October’s decline, maintains that economic fundamentals remain fairly good--and that seemingly steep market drops have been exaggerated by journalists who often fail to measure the declines in percentage terms against the market’s record-breaking levels.
“The newspapers should be sort of ashamed, because they’re absolutely wrong,” Kirkpatrick said of media attention to market declines of recent years.
“If you were a buyer on any one of those days, you’d have made nothing but money for the next six months,” he said.
