With the Dow in striking distance of the 4000 zone, plenty of investors have become increasingly acrophobic. Investment adviser F. Van Kasper isn't one of them, though. He thinks the market still abounds with attractive values and is scooping up stocks at current levels.
"One's strategy should be to buy value on the cheap any time it's available, and there are plenty to buy even now--particularly among the small-cap to mid-cap emerging-growth stocks," says the chairman and president of Van Kasper & Co., a San Francisco-based investment firm. "Sure, we may see an interim market pullback, but the major trend is still up," he argues. The reawakened economy, a leaner and more productive Corporate America, and the nation's strong competitive position worldwide will continue to propel the market, he says.
TOP PICKS. Van Kasper's picks last year gained 16.6%, vs. 7.1% for the S&P 500 index. Most of his choices for 1994 are bets on technology and finance--the two areas he believes will be hot in the 1990s. In technology, he likes Alpha-Beta, a biotech company developing therapeutic carbohydrates. It hit 35 a share in mid-October but has come down to 28. Alpha's most advanced product, Betafectin, has completed clinical tests to reduce infections in high-risk post-op patients. Alpha-Beta is also developing food additives that would help lower serum cholesterol. Although Van Kasper doesn't see profits until 1996, he says the company is one to bet on big.
Next is Rainbow Technologies, a leading maker of software-protection devices. Its CD-ROM VendorSystem is used by major computer companies including Apple, Adobe, Aldus, and Ingram. Trading as high as 30 in late August, the stock is now at 19, which Van Kasper says is a "compelling buying opportunity." He sees earnings rising from $1.12 a share in 1993 to $1.35 in 1994 and to $1.65 in 1995.
Van Kasper says his financial stock picks--First American Financial and Vallicorp Holdings--have niche markets that are growing fast.
First American, the nation's second-largest title insurer, has been on the rise since summer--from 26 in July to 36 on Jan. 26. Its title insurance business, says Van Kasper, is rebounding, along with its other operations, including a small bank. He sees earnings of $5.50 in 1994 and $6 in 1995, up from 1993's $5.37. Net in 1992 was $4.55.
Vallicorp is the largest independent bank in California's San Joaquin Valley, with assets of $800 million. Earnings, expected to hit a record $1.15 in 1993, should climb to $1.35 this year and $1.50 next year, says Van Kasper. "That, plus a return on equity of nearly 14% and strong capital and reserve ratios makes Vallicorp an attractive buy."