Defense play a winner Hawaii financial consultant Mike Corcoran has been hunkered down with defense stocks all year trying to survive the bear market.
for stock picker
Consultant Mike Corcoran is the best
performer year-to-date of the
Star-Bulletin’s forecastersBy Dave Segal
dsegal@starbulletin.comWhile Corcoran still doesn't believe it's safe to emerge yet, his conservative strategy has proved to be a winning one as his 7.2 percent return over the first three quarters outpaced six other local experts in the Star-Bulletin's 2002 survey of best investment ideas.
"I think defense (stocks) used to be cyclical, but I think they're growth stocks now as long as there's this terrorism (concern)," Corcoran said "At least for the next three or four years, you should have something in defense (in your portfolio)."
With just one quarter to go in 2002, five of the seven local stock pickers' portfolios showed overall losses for the year. The only other expert to show a gain was Dwight Melton, president of the Patience and Discipline Investment Club and a director of the National Association of Investors Corp. Aloha Hawaii Chapter, a nonprofit investment education organization. Melton's picks were up 1.4 percent.
Among the others:
>> Richard Behnke, the former president of Abel-Behnke Corp. Securities who died May 28, was off 9.3 percent after leading at the midyear point with a return of 29.9 percent.>> Barry Hyman, portfolio manager and vice president of Financial & Investment Group Ltd. in Wailuku, Maui, declined 11.2 percent.
>> Richard Dole, chief executive officer of Dole Capital LLC, lost 20.9 percent.
>> Cindi John, investment representative of financial-services firm Edward Jones, dropped 34.7 percent.
>> Gordon Ching, president of the NAIC Aloha Hawaii Chapter, declined 38 percent.
Hyman, whose portfolio would have been down a mere 0.3 percent without a 98.6 percent meltdown by WorldCom Inc. tracking stock MCI Group, said it's important for investors to regularly monitor their holdings.
"It is not responsible to make buy recommendations without continuous follow-up so you can also recommend when to sell," Hyman said. "Conditions regarding companies change. Figuring out what to buy is the easy part. Knowing what and when to sell is where the challenge lies. It is not responsible to hold investments that no longer warrant their current prices."
Corcoran, who mostly concentrated his picks in the aerospace defense and health care sectors, had the best-performing individual issue in defense company Lockheed Martin Corp., which posted a 39.3 percent total return through the first nine months. Among his other defense contractor selections, General Dynamics Corp. was up 3.1 percent while Raytheon Co. was down 8.8 percent.
"I really think Raytheon is the best one of the bunch because of the electronic part, the security aspect," Corcoran said. "You also should put Boeing in that area because they make these (pilotless) drones and (other military aircraft). And if the commercial (jetliner) ever comes back (in demand), Boeing will be a sleeper."
Corcoran also received strong performances from hospital operators HCA Inc. (up 23.7 percent) and Universal Health Services Inc. (up 19.6 percent) but said he'd only rate those stocks as a "hold" now and wouldn't buy any additional shares. Instead, he'd purchase WellPoint Health Networks Inc., a health maintenance organization that serves members through Blue Cross and Blue Shield; and Health Management Associates Inc., a hospital operator that serves communities primarily in the Southwest and Southeast. Both WellPoint and HMA are up for the year.
Duke Energy Corp.'s preferred stock, off 33.6 percent, was Corcoran's only selection to tank despite a dividend that pays $2.06 a share annually, or $206 for every 100 shares.
"It's kind of tied to Duke Power, and Duke Power is having a lot of problems with the government with revenue swapping and accounting," Corcoran said. "It's very safe because it's got a secured dividend. For someone interested in income, it's still a good opportunity."
Among other sectors or stocks Corcoran likes are home builders such as KB Home and Toll Brothers Inc. and coffee retailer Starbucks Corp. He said he's not willing yet to go out on a limb as long as the stock market continues to muddle along.
"I think (the market) still hasn't bottomed," Corcoran said. "I could be wrong. Everyone's been calling the bottom. I think maybe we need to try once more for the bottom.
"The economy is getting better but it's not robust. I kind of figure it will go sideways until the end of the year or down. That's why I'm still on the defensive picks."
Meanwhile, Melton, who bet his money on the strength of the consumers, was rewarded as Michaels Stores, which owns art and crafts outlets, jumped 38.7 percent and Chico's FAS Inc., which sells women's casual clothing, rose 20.4 percent amid two stock splits.
Behnke and Hyman also both picked stocks that gained at least 20 percent. Behnke's choice of Southern Security Life Insurance Co. rose 21.7 percent while Hyman's selection of Annaly Mortgage Management Inc., a real estate investment trust that owns and manages a portfolio of mortgage backed securities, gained 24.2 percent.
Dole's top pick, real estate investment trust iStar Financial Corp., rose 16.9 percent.
However, John and Ching had all their picks finish in the red. John's best selection, real estate investment trust Equity Office Properties Inc., dropped 9.6 percent while Ching's best selection, tobacco and food conglomerate Philip Morris Cos. Inc., lost 12.1 percent.
