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This article from Dow Jones News Retrieval does an excellent job of summarizing the bullish case for stocks. We have excised the name of the portfolio manager and his firm. We are not criticizing and individual or his firm. His six-year annual return is almost twice that of the S&P 500. Instead, we are using the example to summarize what we feel is the expectation of the majority toward stocks.


08/25 =Money Manager Beats S&P 500 With Chemistry Background

By David Weidner

NEW YORK (Dow Jones)--Xxxxxx Xxxxxxxxxx has taken his chemistry degree to the stock market and come up with a formula for success.

The $400 million he manages as president of Cleveland-based Xxxxxx Investments Inc. has posted returns of 30.17% this year through July 31, enough almost to match the Standard & Poor's 500 Index of 30.21% and keep his six-year annual return average at 34.42%. The S&P 500 returned 19.77% over that six-year period.

Xxxxxxxxxx, 41 years old, says he produced the returns by using a research approach to investing. His stock-picking relies heavily on evaluating products he knows through his chemistry background, such as medicine stocks. His partners' engineering backgrounds help him pick technology stocks.

Xxxxxxxxxx also credits what he believes is Xxxxxx's status as a Wall Street outsider. Xxxxxx's Ohio office avoids the noise and rumors that abound in New York, he says. "We sit back and look at things a little more thoroughly."

Xxxxxx can be more cautious than some because it doesn't have a lot of investor pressure. The investment management company offers no mutual funds and only accepts investments of $500,000 or more. To keep that money properly invested, Xxxxxx took no business for several months in 1996.

Among Xxxxxxxxxx's picks: Microchip Technology Inc. (MCHP), a Chandler, Ariz.-based computer-chip maker that went from $207.96 million in sales in 1995 to a projected $334.25 million this year.

04:16 PM EDT


08/25 =Money Manager/Chemistry-2-: Market Can Roar For 10 Years

Another top pick is Medtronic Inc. (MDT), a Minneapolis, Minn.-based medical products manufacturer. Medtronic had net income of $232 million in 1994 but saw that number rise to $437.8 million last year.

Xxxxxxxxxx believes there are more returns ahead. He's predicting a bull market for at least five years - 10 if conditions don't change dramatically. His biggest piece of evidence is the U.S. Treasury's decision on April 28 to buy back $60 billion in debt, and a meager 2% annual inflation rate.

And while the Dow Jones Industrial Average has seen nearly a 400-point price drop from its high this year, the market remains up 19% from where it was at the end of 1996.

"It's a wonderful time period that's going to last for a while," he says. "We won't experience anything like this again."

His prediction is based on the influence of Baby Boomers who continue to pour their incomes into mutual funds, which in turn drives up the prices of stocks. Xxxxxxxxxx expects the bull market to turn bearish when the Boomers begin drawing on those investments rather than adding to them.

So how does he plan to prepare for the next decade of prosperity? "I don't think it's large-caps or small-caps or size that matters," he says. "I look for where the market will be. International markets are the future, demographically speaking. So I like domestic companies that are active internationally."

That includes companies as big as Coca-Cola Co. or Intel Corp. or smaller computer companies that have the potential to sell overseas.

So while Xxxxxxxxxx dismisses the S&P 500 as being "10 to 15% overvalued," there are companies he would buy - even though he expects some price corrections along the way.

"That's not a trend that continues forever," he says.


04:16 PM EDT


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Last modified: April 06, 2005