The Best Bets for Their Money : Six Successful Investors Discuss Their Favorite Stocks for ’93

To capitalize on trends brought forward by the new Clinton Administration--and the new year--you may want to think about investing in a few different stocks in 1993, investment experts say.

Which stocks? As always, there’s no consensus. But here are top picks from half a dozen successful money managers whose reputations live or die by how well they choose:

Charles Allmon

Charles Allmon, editor of the Growth Stock Outlook newsletter, has professionally managed money for 18 years. Returns on his mutual fund, the Charles Allmon Trust Inc., have averaged about 8% annually for the last six years--far below the average return for most major market indexes in that period.

What is noteworthy, though, is that Allmon has never had a down year in those 18 years. The reason may be illustrated in his oft-repeated line: “I’m neither a bull (market optimist) nor a bear (pessimist). I’m a chicken.”

When asked to pick just one hot stock for 1993, he balks. Although he believes that the stock market is currently overvalued, he’s got three top picks for the year--again, because he’s conservative.

“I’ve seen too many guys who pick one stock, put all their money in it, and down they go,” he says. “I’d rather buy a package of three.”

Allmon’s three: Bristol-Myers Squibb, a fast-growing New York-based pharmaceutical company; Brazilian phone company Telebras, which is also “growing by leaps and bounds” despite economic and political turmoil, and Philips, the Dutch electronics company, now selling for about half its book value thanks to the economic slump in Europe.

All three have unusually bright growth prospects, Allmon says, and are selling at what he believes are reasonable prices. Allmon believes that each is likely to at least double in value in three to five years.

James K. Schmidt

James K. Schmidt, portfolio manager of John Hancock’s Freedom Regional Bank fund and the Freedom Southeastern Thrift and Bank fund, is betting on a Cinderella story at Baltimore Bancorp.

The Washington-based bank was hit hard by souring real estate loans in 1992, but its prospects are brightening, he says. The new Administration will bring scores of home buyers to Washington--more than offsetting the number of people leaving--which should help bolster the residential real estate market, he says. And President Clinton’s promise of big government programs may bolster the economy, helping banks in the process.

Baltimore Bancorp, which posted losses in 1992, is selling for about $8 a share--less than its book value, which is the net value of the firm’s assets. It’s a risky bet, Schmidt admits. But similar gambles have landed his two funds at the top of the performance charts. Freedom Southeastern Thrift jumped 78.7% in 1992--the best performance of any mutual fund. And his regional bank fund was up 47.4%, according to Lipper.

Robert M. Kippes

Robert M. Kippes, portfolio co-manager of the Aim Aggressive Growth fund--which posted a 26.4% return in the final quarter of 1992--believes that Tseng Labs Inc., an over-the-counter company that makes graphic chips for personal computers, is the stock to watch. Selling at just over $15 a share, it’s trading at about 15 times “conservative (per-share) earnings estimates” for 1993, he says. Tseng will be bringing a new chip to market in the first quarter, which Kippes believes will significantly boost the company’s earnings and stock price.

Lawrence Auriana

If you had invested $10,000 in the Kaufmann Fund at the end of 1987, you would have $33,596 today, according to figures published by Lipper Analytical Services in New York. That five-year performance--the best of the more than 4,000 mutual funds Lipper tracks--is the result of focusing on small companies with big prospects, says Lawrence Auriana, the fund’s co-manager.

Auriana says the hot stock of 1993 will be MedChem, a New York Stock Exchange-traded company that makes medical equipment. MedChem is a step away from receiving Food and Drug Administration approval for a drug that helps treat TMJ--an ailment that causes a person’s jaw to click--he says. About 20 million people are afflicted with TMJ, Auriana adds, so the potential market for the drug is huge.

Auriana believes that MedChem will grow at a 20% clip for “the foreseeable future,” and because its stock price is now about 16.5 times per-share earnings for the last year, that makes MedChem a bargain, he says.

Brian Posner

Fidelity Investment’s Equity-Income II fund returned nearly 19.1% in 1992, which made it a top income-oriented mutual fund. Such funds are more conservative than growth funds, such as those managed by Kippes and Auriana.

This year, fund manager Brian Posner is putting his money on British Petroleum. That’s because the London-based oil and chemical concern has just completed a corporate restructuring that included slashing its dividend, laying off workers and cutting costs. The result is a leaner, more profitable company, he says.

Although Americans usually have to worry about exchange-rate fluctuations when investing in foreign-based companies, British Petroleum is a giant international concern that gets much of its revenue in U.S. dollars. That provides a natural hedge against currency fluctuations, Posner says.

Warren Lammert

Warren Lammert has an impressive track record in the short time he’s been a fund manager. The longtime senior analyst started managing the Janus Balanced fund in September. In less than four months, his investors earned 12.53%.

Now he’s a Progressive Corp. fan. Earnings of its main subsidiary, Cleveland-based Progressive Insurance, are already rising, thanks to a corporate restructuring. At the same time, the company’s core business is getting more attractive because of social and demographic changes.

Specifically, the nation’s war against drugs and the push by Mothers Against Drunk Driving has created tremendous social pressure to stay off the road while intoxicated. As a result, there’s been a 20% reduction in alcohol-related highway deaths in the last 10 years--a trend that’s likely to continue as drivers get older and more conservative. That’s particularly important to insurers who specialize in high-risk drivers, because their business is simply becoming a touch less treacherous.

Then too the aging of the nation’s population may also benefit Progressive, Lammert says. That’s because the company’s once-youthful drivers are now heading into their 30s, getting married and having families. That may spur some to trade in their Camaros for Volvo station wagons emblazoned with signs reading “Baby on Board.”

Stock Picks

Top stock picks for 1993 by six money managers interviewed by The Times:

Price Price Company (symbol, market) Jan. 4 Jan. 22 Baltimore Bancorp (BBB, NYSE) $7.000 $9.000 Bristol-Myers Squibb (BMY, NYSE) $66.375 $60.250 British Petroleum (BP, NYSE) $44.750 $42.750 MedChem (MCH, NYSE) $12.125 $12.375 Philips NV (PHG, NYSE) $11.125 $13.500 Progressive Corp (PGR, NYSE) $28.875 $35.500 Telebras (TBRAY, OTC pink sheets) $17.250 $18.50 Tseng Labs (TSNG, NASDAQ) $14.375 $15.375