Market Watch : Profit in Panicky Times
To be a buyer in the stock market today, you have to believe that you know something that most people don’t. James R. Hocking, the new chief investment officer of Citibank’s U.S. investment division, thinks that he does have a little special market intelligence. It’s a blend of optimism and realism that is simple but largely shunned in panicky markets such as this one.
The 60-year-old Hocking, who joined Citibank in May, has spent the past 30 years managing money. He came to Citibank from Templeton International, the global investment firm founded by the legendary John Templeton.
Hocking, whose division runs $15 billion for wealthy individuals nationwide, subscribes to Templeton’s basic investment rule: “Carefully researched investments, purchased and held, really work out,” Hocking says. So although many investors are too afraid to jump into stocks today--worried that the market bottom may be months away--he has been a buyer.
When the Dow Jones industrial index was near 3,000 in mid-July, Hocking admits that he was running out of bargains. Citibank’s average stock account had about 25% of assets in cash at that point. But with the Dow at 2,510.64, Hocking says, he sees plenty of compelling values, so he’s putting cash to work.
What about Mideast war fears and the economy’s apparent slide into recession? Hocking doesn’t see either factor as serious problems for the stock market in the longer term. Any war will end quickly, he believes, and any recession will be mild.
His stock-picking discipline is simply to buy value, he says. When you see it, buy it. “And if we buy and it goes down, it then becomes more attractive. We step up and buy some more,” he says.
That may sound like a recipe for trouble in a bear market, but Hocking defies anyone to pick the market bottom. “Can you time the market? The answer is emphatically no,” he says. So if you aren’t sure where the bottom lies, but you do know when a stock is selling for a price that looks cheap given the company’s long-term outlook, you buy, he says.
One of Hocking’s favorite stock themes now is the capital goods area: Companies that provide the heavy equipment or services geared to modernizing the industrial sector. The stocks on that list have been beaten down mercilessly recently, on recession worries.
But Hocking thinks that such names as Caterpillar ($42.25 on Friday), Waste Management ($32), General Electric ($54.25) and Fluor ($34.875) are excellent long-term bargains now. Like some other money managers, Hocking believes that the 1990s will be a decade of capital investment worldwide, rather than one dominated by consumer spending, as the 1980s were.
Consequently, he also has few retailing stocks on his list, except for such names as Limited ($13.375) and Home Depot ($30.50).
Another Hocking theme: Look for stock values worldwide. “We think corporate profit growth in 1991 in most countries will be greater than in the U.S.,” he says.
Even before Hocking’s arrival at Citibank, the company’s private banking division had done a fairly good job for its well-heeled individual clients. In the 10 years ended last Dec. 31, Citibank says its average annualized total return in personal investment fund stock accounts was 16.2%, compared to 17.5% for the Standard & Poor’s 500-stock index. In the 12 months ended June 30, Citibank’s average account performed slightly better than the market, the bank says.
About 4,000 accounts are serviced by 52 Citibank money managers nationwide. The bank has four managers in its Los Angeles office. The minimum investment required: $1 million.
Hocking says his clients “almost uniformly are intrigued and supportive” of the idea of buying stocks now rather than selling out. He admits that he’d almost rather see more panic on the part of clients and in the market, so he can get stocks at cheaper prices. But then, he also recalls another Templeton rule: “If you’re not an optimist,” he says, “I don’t think you can be a very good investor.”
Briefly: The latest bull-and-bear count among investment advisers shows optimism rising again. Larchmont, N.Y.-based Investors Intelligence newsletter’s weekly survey showed that 51.7% of advisers were bearish last week, down from 55.3% the previous week. Bulls totaled 30.3%, compared to 28.4%; advisers expecting a further market correction ahead totaled 18%, compared to 16.3%. The high reading for the bears since the Iraqi invasion of Kuwait was 56% in mid-September, the newsletter says. So the pessimism still hasn’t gotten as high as it was last winter, when the bear total neared 58%. . . .
Cruttenden & Co., a Newport Beach-based brokerage, is sponsoring its “Fifth Annual Southern California Conference for Emerging Growth Companies” Wednesday and Thursday at the Le Meridien Hotel in Newport Beach. Thirty-five young Southland companies will make presentations to more than 100 institutional investors, Cruttenden says.
CITI’S STOCK RECORD
Citibank hasn’t done too badly managing stock trust funds, though long-term the bank has lagged the S&P; 500. New manager James Hocking now gets a shot at boosting the bank’s record.
Total return, annualized, in percent
12 mos. 3 yrs. 10 yrs. ended to to June 30 12/31/90 12/31/89 CITIBANK 16.9 16.8 16.2 S&P; 16.5 17.4 17.5
Note: Data for Citibank’s trust department Equity Fund
Source: Citibank
