Day of the Mid-Caps

With the Fed on a mission to jump-start the economy, expect the small-to-mid-cap stocks to lead the market's next upswing. So argues Joe Battipaglia, Chairman of Investment Policy at Gruntal, who says the group performs best in an environment of declining interest rates. Each time the Fed has eased rates in years when the economy was in recession, the universe of low-cap stocks in the Russell 2000 usually outpaced the large-cap Russell 1000. So Battipaglia has overweighted his portfolio with small-and-mid-cap stocks in such areas as pharmaceuticals, financials, and technology.

Two of Battipaglia's top picks: Caliper Technologies (CALP ), both a tech and a biotech play, and North Fork Bancorp. (NFB ), a bank holding company serving New York and Connecticut.

Caliper's proprietary technology sets a new standard in biological research, says Battipaglia. It miniaturizes and integrates entire lab processes into a "lab chip" workstation that contains all the hardware and software to perform lab analyses. The technology is sold to big drugmakers to speed up research and cut its cost. Drugmakers such as Merck have acquired biotechs to help them in their quest for new drugs. He expects Caliper to be in the black in 2002, earning 21 cents a share.

North Fork's stock has been on the rise in part because of its allure as a possible target in a consolidating industry. North Fork posted solid first-quarter results as deposits and loans grew briskly. The opening of more Manhattan branches, says Battipaglia, will spur growth. First-quarter deposits at its New York branches grew at an annualized 56% for existing branches. And its pending purchase of Commercial Bank of New York, he adds, should boost growth and its value. He expects earnings of $1.92 in 2001 and $2.20 in 2002.

By Gene G. Marcial

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