|Volume 2: No. 02|
Mutual funds based on health and biotechnology averaged a 74% return last year, creating pressure for fund managers to find equally lucrative investments in the coming year. Financial- service funds made 61%, small-company funds made 52%, and science/technology funds made 45%. The average across all funds was 30.7%, vs. 26.3% for the Standard & Poor's 500. Domestic funds beat international ones, and equity funds did better than long-term fixed-income funds. [AP. SJM, 1/4.] Why work, if you can afford to invest? Well, last year the equity funds lost 7.3%. This year the gold funds lost 4.5%. As factories and jobs become more automated, though, an increasing percentage of U.S. incomes may have to come from investments.
Michael Murphy, publisher of the California Technology Stock Letter (Murenove Inc., Half Moon Bay, CA), is a bearish investment advisor who helps others make money on declining stocks. Murphy is bullish on certain high-tech stocks, though. He likes to track R&D spending, which he factors into a growth/flow ratio of his own invention. It's like a price/earnings ratio, but adds R&D to earnings. (R&D is usually treated as an expense, which makes high-tech companies look unattractive to Wall Street.) "On average, technology companies spend at least 7% of sales on R&D ... The more companies spend on R&D, the more they can drive their own growth, almost regardless of what is going on in the economy." By the time the research pays off, he and his clients already own the stock. Some of his calls have been wrong, of course, but a recent 5-year ranking put Michael's newsletter #2 in a field of 70. His advice gave a 172% return, vs. 76% for the Standard & Poor's 500. [Steve Kaufman, SJM, 12/23.]
The National Association of Investors Corp. says that 62% of the investment clubs it surveyed beat the S&P 500 over nine years. Only 21% of mutual funds did the same. One secret is to invest new money regularly. [Newsweek, 12/9.] Another is to use home computers. Note, however, that disbanded clubs were not included in the survey.
I don't know if this is legit or just a sales pitch, but Franz Hrazdira (firstname.lastname@example.org) is organizing a network group to purchase, study, and use The London Trading System for trading futures and options. $50, or CAN$60, by 1/15/92. [misc.entrepreneurs, 12/28.]
If you're investing -- either money or career time -- be careful about IPOs. Many companies go public because of financial problems, and the root causes may persist despite an influx of cash. The number of high-tech companies going public this year has been more than double that in each of the previous three years. [Margaret Ryan, EE Times, 11/25.] I've heard that working for mid-sized companies has all the problems and none of the career benefits of larger and smaller companies.
One company trying to make sense of the market is Prediction Co. (Los Alamos, NM). Doyne Farmer, VP of Research, claims to have mathematical methods for extracting non-linear patterns from chaotic financial data. [Michael Schrage, SJM, 1/6.]
With a jump in Microsoft's stock to $114, Bill Gates is now considered the wealthiest person in the U.S. [Reuters. SF Chronicle, 1/3.] It's unlikely that anyone will buy out his $6.5B in Microsoft stock -- and doing so would depress the stock price -- but he's going to get an incredible amount of publicity. If publicity equals sales, Microsoft will benefit and the stock should rise. If publicity oversells the stock, it could plummet later. Care to place a bet?