Stanley Nabi has seen all kinds of market surprises, having been around the Street for nearly 40 years--first as a broker-analyst and later as research and investment chief at Lazard Fr eres. Now a chief economist and investment strategist at Bessemer Trust, Nabi sees no big surprises. He predicts the market will neither surge nor collapse. True, the economy has been tepid, but corporate earnings have been reasonably decent amid depressed interest rates and stable inflation, explains Nabi. The only way to make money in this market, he asserts, is to pick stocks--smartly.

He has a penchant for companies distinguished by strong growth, low price-earnings ratios, and unrecognized values. And he prefers the big-money, large-cap stocks for Bessemer's $10 billion portfolio.

One of his favorites is Morgan Stanley, a major Wall Street firm that's been profitable in the highly risky securities and investment business. Morgan's global presence, says Nabi, will benefit from the corporate restructuring that he sees coming in Europe.

IN THE LAB. So far, Morgan has been topping analysts' expectations, and Nabi has had to boost his own estimates for this year, to $7 a share from $6.25. Morgan earned $5.93 in 1992. Next year, he expects $7.75. Currently at 74, the stock trades at less than twice its book value of $44.50 a share. Nabi thinks it deserves to trade at 3 times book, and he believes Morgan's p-e of 10 is cheap.

Tyco Laboratories is a stock Nabi started buying when it came under pressure recently. A diversified manufacturing company, Tyco tumbled from 47 a share in March to 38 in late July. The drop has pushed down its p-e to 13 times Nabi's estimated 1994 earnings--way below its historical ratio of 17. The stock has edged up to 41. Poor sales this year of its fire-protection systems in Europe have offset gains in the U.S. But Nabi sees U.S. sales firing up soon because of an upturn in home and building construction. Tyco also makes fiber-optic telecommunications cables that he expects will be a big source of profits. Nabi estimates Tyco earned $2.30 in the year ended June 30, 1993, vs. 1992's $2.06. In 1994, he expects $2.75.

Nabi is also high on May Department Stores. The stock hit a new high of 42 on Aug. 9 after reporting a 22% rise in second-quarter earnings. Unlike most analysts, says Nabi, "I'm not bearish on the consumer." So he thinks May, a retailer with 303 department stores in 29 states and a nationwide chain of 3,500 shoe stores, will surprise the street with even bigger gains when the economy revs up. Nabi sees earnings rising to $2.70 in the year ending Jan. 31, 1994, and to $3 in 1995, vs. $2.26 a year ago.

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