As a veteran Wall Streeter, Michael Metz is aware that the market is still pretty edgy, primarily because it's trying to adjust to a Clinton victory. Metz, who is "a self-professed liberal-Democrat and not ashamed to admit it," expects Clinton to win. But he isn't rushing to design a portfolio for a Clinton era.
To begin with, Metz, chief investment strategist at Oppenheimer, doubts that Clinton will be able to execute 75% of his campaign promises. But he dismisses the growing notion that the market will collapse once the Democrat is elected. "There will neither be a market debacle nor a big thrill for investors in 1993," says Metz. "It will be a so-called inside market where the Dow Jones industrials will confine themselves within a range." He forecasts that the Dow in the first year of the Clinton Administration will trade between 3000 and 3500.
That means if investors are to make any money, they'll have to do it through astute stockpicking. Among Metz's picks for next year are Merrill Lynch, Newmont Mining, and Telefonos de Mexico.
GOLD RUSH. Merrill, the nation's leading securities brokerage house, "is one of the most undervalued issues around based on the company's rosy outlook in the 1990s," says Metz. He expects the company to benefit from the projected rise in the national savings rate, the return of the individual investor to the equity market, and the huge backlog of stock offerings waiting to come to market.
Merrill is a buy, says Metz, because investors still think of it as a cyclical stock when it's really a growth stock. He sees Merrill earnings rising to $6.75 a share this year and to $7.50 in 1993, vs. 1991's $6.03. Metz believes the stock, now at 54 a share, will hit 70 next year.
Newmont is Metz's play in what he believes will be a dramatic rise in the demand for gold. The mining company owns 91% of Newmont Gold, the largest gold producer in North America. Metz expects gold prices to rise next year, from $350 an ounce to $450, mainly because he believes the former Soviet Union has liquidated its hoard and suffers from declining production. The continuing turmoil in Russia, the bloodshed in the former Yugoslavia, and the problems facing Germany and the rest of Europe bode well for the demand for gold, says Metz. He expects Newmont's earnings to jump from last year's $1.38 to $2 a share this year and $3 in 1993. He thinks the stock, now at 47, will hit 65 by next year.
Telefonos de Mexico is Metz's top candidate to take advantage of the Latin American boom. He says this Big Board stock is still very underpriced. He expects earnings of $4.70 this year and $5.60 next year, vs. last year's 40 centss. Metz expects the stock, now at 49, to hit 55 to 60 in 1993.