NEW YORK (CBS.MW) -- From the many magazine articles he has written and the countless TV guest shots he has made, Robert Stovall is one of the best known Wall Street analysts. He is also one of the best, period.
"Every portfolio -- man or boy, grandma or baby doll -- should have some technology stocks."
Robert Stovall, Stovall Twenty-First Advisers
In late September -- at a time when many an analyst was growling bearishly -- Stovall predicted to me that the market would hit bottom in October and rise in November and December.
Today that looks like a good bet. Having started as a junior analyst for E.F. Hutton in the late 1950s, Stovall has risen to head his own firm, Stovall Twenty-First Advisers, which he says is the money doctor for some 75 wealthy individuals and families, ranging in age from nearly 90 to newborn.
And what stocks is Stovall prescribing now? He responded in an interview: "Every portfolio -- man or boy, grandma or baby doll -- should have some technology stocks." For a good way to get into the tech issues, he recommends buying shares in the Nasdaq-100 Index /zigman2/quotes/208575548/composite QQQ -0.10% .
"If you buy that one index, you get Microsoft /zigman2/quotes/207732364/composite MSFT -1.01% and Intel /zigman2/quotes/203649727/composite INTC +1.61% and Amgen /zigman2/quotes/209157011/composite AMGN +0.41% and all those other stocks. And you're not terribly wounded if one of them has a shortfall for a quarter or so," he said. "I also think that next year could see a revival of buying interest in some of the other must-own-for-the-very-long-term sectors, such as financial services and health care and perhaps even environmental services.
Profiting from Y2K
"Going into election year 2000, the health care industry may attract more investment dollars for its stocks. They're still richly priced, but they're well off their highs, so they appeal to me. I'm interested largely in the pharmaceuticals, notably Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +0.32% , Merck /zigman2/quotes/209956077/composite MRK +0.95% and Abbott Labs /zigman2/quotes/203724446/composite ABT +1.54% ," Stovall added.
But he isn't interested in hospital chains: "The hospital managements are too fuzzy, and the stock performance is indifferent." In financial services, Stovall likes Union Planters Bank /zigman2/quotes/225284136/composite UPC -0.10% of Memphis, Tennessee. "It's a regional bank that has made a number of acquisitions. It could make some more acquisitions -- or be acquired itself. Also, Chase Bank still looks interesting to me."
Stovall is watching a number of companies that have been badly beaten down. He's not yet buying them but may do so. Among them are insurance companies. Says he: "Any number of insurance companies have been battered to a point where they are down dramatically from their highs of the last 52 weeks. Examples are Allstate , Ohio Casualty and St. Paul Companies /zigman2/quotes/205727759/composite SPC +0.05% ."
Also on his watch list are the euphemistically named burial services companies, such as Hillenbrand Industries , which makes caskets. They've been hurting primarily because the death rate is down. But, says Stovall, "I also think there are a lot of frail people who are hanging on because they want to see the millenium." Historically, he says, the death rate rises after the new year begins.
As for the Y2K effect, says Stovall, "Some people want to make sure that they have radios and flashlights, as well as space heaters powered by their own private gasoline-powered generator. So I have bought stocks such as Rayovac , which makes the Rayovac battery. And Ralston-Purina has the Eveready, Energizer battery and Blyth Industries makes Sterno and candles."
Even so, says Stovall, "I think that the most noticeable drama of Y2K will be the long lines of customers in early January returning their generators and batteries -- unused -- and trying to return their crates of survival food and cases of bottled water. So January and February could get the year off to a good start." Asked to identify an undervalued stock, Stovall instantly names AT&T /zigman2/quotes/203165245/composite T +0.74% , which is down from its 52-week high of 64 to 47.
In high tech, "I also own and like Lucent /zigman2/quotes/222210431/composite LU -0.14% and Cisco Systems /zigman2/quotes/209509471/composite CSCO +0.42% . Every portfolio should have General Electric /zigman2/quotes/208495069/composite GE +0.0084% and Microsoft in it as well. They are high priced, but the pattern of the last decade has been don't bottom-fish for the small stocks. Just buy the big stocks on temporary weakness, and they will come through for you."
If you're fascinated by big stocks, Stovall suggests that you watch for a new fund, due to arrive any day now the Dow Jones Global Titans, which will have the ticker DJGT. It will consist of the 50 biggest companies worldwide -- from American International Group /zigman2/quotes/203700638/composite AIG +0.29% to Deutsche Telekom , Hewlett-Packard to Toyota /zigman2/quotes/207653022/composite TOYOF +1.56% -- that get at least 40 percent of their sales away from their home countries.