With the Dow nervously failing to hold fast at 3000, even the sturdiest of bulls have turned somewhat defensive--raising cash and paring their stock hoards. But not Goldman Sachs investment chief Steve Einhorn. "Stay with stocks," he advises. "This bull market is far from over."

Einhorn estimates that over the next 12 months, stocks will produce a 13% to 15% total return. If he's right, the Dow should top 3300 by next summer.

An unrelenting bear in 1990, Einhorn's model pmrtfolio racked up a 3.6% total return, vs. a 6.6% loss for the Standard & Poor's 500-stock index. Einhorn turned bullish only in February of 1991, when the Dow had climbed to 2700. He failed to catch all of the Dow's 650-point run-up from its October lows to early June, but he's sure he'll be an even bigger winner this year by sticking with the market.

UNSKITTISH ISSUES. Einhorn is currently high on growth stocks--shares of companies that are expected to post above-average earnings growth over the next five years. Among his chief favorites:

-- Bristol-Myers Squibb, whose expanding drug-and-household product lines should be in high demand even in a modest-growth economy. Given the company's pricing flexibility, Einhorn thinks earnings should grow by 16% to 19% annually over the next five years. So the stock, trading at $80 a share, is still undervalued based on its current price-earnings multiple of 20. It traded at a big premium to the market in past years, notes Einhorn, and should continue to do so.

-- Federal National Mortgage Assn., popularly known as Fannie Mae. Einhorn thinks it's cheap at $49 a share, based on its current p-e of 10. He estimates that earnings at the nation's largest mortgage lender will grow at a pace of at least 13% annually. He notes that its innovative financings have enabled Fannie Mae to expand its access to lower-cost mortgage funds.

-- Philip Morris, the nation's largest cigarette producer--and largest food processor. Based on 1992 earnings, its stock, now at 65, is still selling at a big discount to the market's p-e, and Einhorn believes the issue is greatly undervalued. He says Philip Morris' huge cash reserve provides the company with "enormous opportunities to expand its food operations overseas."

Other companies that Einhorn believes are undervalued, given their clean balance sheets, strong cash flow, and healthy business fundamentals: Abbott Laboratories, Colgate-Palmolive, Gillette, Wal-Mart Stores, and The Limited.

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