It's 5:30 a.m. (7:30 in New York) on Monday, Feb. 7--the first trading day after the Dow's 96-point plunge. Money manager Laree Perez is in her office atop a 10-story building overlooking the picturesque Sandia Mountains in Albuquerque. She's anxious--anxious to buy more shares of her three favorite stocks: Wrigley, Nordson, and Santa Fe Pacific.
They were among the stocks in her $150 million portfolio that had gotten hammered by the Fed's surprise move on Feb. 4 to nudge up short-term interest rates. "The Fed gave us a window to load up on stocks that we want more of--at bargain prices," says Perez. The Dow has fallen an additional 40 points since, to 3831. But Perez, president and chief investment officer of Medallion Investment Management, remains bullish.
She and partner John Ulrich, Medallion's managing director, formed the firm just a year ago after quitting Merrill Lynch, where they had been among the 25% top-producing brokers. In the first 12 months ended Jan. 31, 1994, Medallion's portfolio of about 40 stocks gained 16% vs. Standard & Poor's 12%.
CHEWING PLEASURE. "We go after stocks with sizzling earnings growth, niche markets, and unique products," says Perez. Wrigley, the world's largest chewing-gum maker, is one company that has continued to set "an enviable growth record" with "very strong" financial assets, says Ulrich. Wrigley puts out Wrigley's Spearmint and Juicy Fruit gum, among others, and is in a good marketing position as generic chewing gum has failed to gain market inroads, notes Ulrich. Much of Wrigley's future growth will be overseas, mainly in China, India, Mexico, and Russia, he adds. Ulrich sees Wrigley making $1.72 a share this year and $1.96 in 1995 vs. 1993's $1.50. He expects the stock, now at 47, to hit 60 this year.
Nordson makes industrial application equipment for products such as adhesives, caulking paints, and coatings. It has sizable overseas operations that account for more than half of sales and operating profits. An economic upturn in Europe and Japan will boost results in a big way, says Ulrich. He sees earnings of $2.48 in 1994 and $2.92 in 1995 vs. 1993's $2.13. Ulrich expects the stock, now at 56, to rise to 80.
Santa Fe Pacific, which owns the Atchison, Topeka and Santa Fe Railway, is benefiting from the economic recovery. It is also a major player in a fast-growing sector of transportation: intermodal services, shipping containers by train over the long-haul leg of a trip and then transferring them to trucks. Santa Fe has spun off most of its natural-resource assets. It's expected to earn $1.15 in 1994 and $1.38 in 1995. Perez sees the stock, now 22, driving up to 40.