This Maverick Is Bullish On Three UnderdogsBy
It was a rather bold call when maverick money manager Seth Glickenhaus forecast in April, 1988, that the Dow Jones industrial average, then at 2100, would jump more than 40%, to 3000, by mid-1989. Glickenhaus' timing was off a bit--it crossed the 3000 mark in July, 1990. He has since stayed bullish. The 79-year-old owner and senior partner of Glickenhaus & Co., a New York investment-management firm, is once again predicting a sprint by the Dow, from its current level of 3740 to 5,000 by 1995.
Glickenhaus makes a lot of money not in predicting the Dow, but in picking stocks. Currently managing $2.1 billion, he has achieved an impressive yearly return of 26.5% over the past three years vs. an 18.1% gain by the Standard & Poor's 500-stock index.
Basically a value investor, Glickenhaus seeks out-of-favor outfits--stocks temporarily rejected by the Street whose dynamics are bound to get recognized soon. Glickenhaus' top picks: Countrywide Credit Industries, which originates, buys, and sells loans for single-family homes; Global Marine, an offshore drilling contractor that emerged from Chapter 11 in 1989; and LTV, another Chapter 11 graduate that exited bankruptcy in June.
GUNG-HO. Analysts are down on Countrywide because of fears that interest rates may be heading higher. But Glickenhaus remains adamantly bullish. "We expect Countrywide to stay on top of all financial companies in the dollar amount of home mortgages it buys and sells," he says. In the first nine months of 1993, Countrywide bought and sold $39 billion, vs. $27 billion for all of 1992. "We expect the company to service $250 billion of mortgages in the next five years," he says. "So we see the stock hitting 75 in three years." It's now at 26.
He's as gung-ho about Global Marine, which operates a fleet of 25 mobile offshore drilling rigs, mostly in the Gulf of Mexico. The surplus of oil rigs of late has dwindled, with demand again on the rise and no new rigs being built. The company has slashed debt, and leasing rates, which had been declining, are now rising. Glickenhaus sees earnings of 20 and cash flow of 50 a share in 1994 and profits of 60 and cash flow of 90 in 1995. The stock, now at 3 5/8, will hit 9 in two years, he predicts.
LTV will benefit from the improving price of steel, says Glickenhaus, who describes the company as a classic economic-recovery play. He thinks it will make $1 to $1.25 a share in 1994 and $3.50 to $4 to 1995. He sees the stock, now at 15, climbing to 25 in a year.
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