While many of the large U.S. investors have been flocking to markets overseas, Wayne Nordberg, partner in charge of equity investing at Lord, Abbett & Co. in New York, is definitely buying American. He's convinced that U.S. stocks are still attractive and the risks manageable.
By historical standards, the market looks expensive, concedes Nordberg, with the Dow Jones industrial average hitting a high of 3710 on Nov. 16 before easing to 3670 on Nov. 22. But in relation to fundamentals such as inflation, interest rates, and corporate earnings, "the market is still quite undervalued," and certain stocks are likely to produce huge returns.
Nordberg has beefed up the portfolio of Lord Abbett, which has $17 billion under management, with large-cap cyclical stocks he thinks stand to benefit the most from even modest economic growth. The U.S. has become the world's low-cost quality producer of a variety of goods, asserts Nordberg. "So our industries should continue gaining market share worldwide."
Four Nordberg top picks include Boeing, Deere, Ford Motor, and Georgia-Pacific.
Boeing, trading at 38, is an example of a U.S. company that's competing well with its foreign rivals. It recently won a fat contract for six 777 jet aircraft from Gulf Air, the flag carrier of Abu Dhabi, Bahrain, Oman, and Qatar--beating Airbus Industrie's A340 aircraft for the business that could generate additional orders.
BANNER YEARS. At Ford, cost-cutting in Europe, plus strong demand in North America, are enhancing its bottom line. Lord Abbett analyst Paul Blaney sees earnings jumping to $6 a share next year from 1993's estimated $3.70 and 1992's loss of $1.46. Selling at 59, Nordberg thinks Ford is an exceptional buy.
Deere, the world's largest farm-equipment maker, which has fallen from a high of 78 in early November to 68, has benefited from the strong yen, thus staving off price competition from the Japanese and the rise in tractor demand. Lord Abbett analyst Tom Bogan sees earnings zooming to $6 next year from 1993's estimated $3.55.
Georgia-Pacific, a big winner this year, is Nordberg's bet in the highly cyclical paper industry. The stock, now at 72, still has strong upside potential over the long haul, says Nordberg. Its strong cash flow and position in both the wood and paper markets should add to the earnings upswing. Lord Abbett analyst Tom Abrams figures Georgia Pacific will earn $5.40 in 1995, up from $2.80 in 1993 and 90 in 1993.