Ah, the joys of holiday shopping!
Just once wouldn't it be nice to visit a department store in December that isn't overflowing with sharp-elbowed, short-tempered bargain hunters? To find a holiday sale where the merchandise isn't being pawed over and picked at by anxious hordes?
If skipping the local mall sounds OK to you, a number of fund managers say the stock market offers some alternatives. These people see a number of sectors -- asset managers, utilities and supermarkets, to name three -- that have been shut out of the postelection rally. Best of all, many of these stocks can be found on sale and with plenty of inventory available for the discerning shopper.
Barry James, portfolio manager of the Ohio-based
Golden Rainbow fund, says utility stocks continue to maintain a low profile on Wall Street despite their recent glowing performance. He calls the group "surprisingly undiscovered" even after this year's 20%-plus rise in the Dow Jones Utility Index.
"Utilities went through so much trashing at the beginning part of the decade with debacles at
," says James. "They were not sexy to begin with, and last year's blackout did not help."
Some names that James views as sleepers include
( DPL), the parent company of Dayton Power and Light.
The utility aisle may not be crowded, but James isn't alone shopping there. John Keeley owns a number of what he calls busted utilities in his
Keeley Small-Cap Value fund. And Keeley has long been a pro at finding companies largely ignored by Wall Street. His fund focuses on four categories rarely found in the market's limelight: bankruptcy survivors, spinoffs, savings and loan conversions and companies trading below book value.
Of that foursome, Keeley says S&L conversions have the most potential. Keeley's fund buys shares of newly public S&Ls soon after their mutual-to-stock conversions. Generally, these are small banks that eventually get taken out by regional powerhouses. Two of Keeley's current faves are
New Alliance Bank Shares
, the largest thrift in Connecticut, and Milwaukee-based
One reason why investors might be ignoring this group is a fear of rising interest rates hurting local banks, a fear Kelley calls unfounded.
"Bank stocks tend to be avoided when interest rates are on the rise, because most investors view this as a negative," says Keeley. "But in actuality, banks make more money when rates rise because they make more money on their loans."
Speaking of empty aisles, the supermarket workers' strike in California earlier this year kept shoppers out of stores and investors on the sidelines.
Barbara Walchli, portfolio manager for the
( ROCAX)Aquila Rocky Mountain Equity fund, says it's time for investors to check into supermarket stocks again, now that the strike is past and the economy is seeing signs of inflation.
"Grocery store chains increase their top lines during periods of higher inflation," says Walchli. "Stocks do better when people see top-line growth."
Her top choice in the group is
, which she says has upgraded its formerly stodgy merchandise and improved its operations after bringing in a supply-chain-management expert from
Neither Neil Hennessy nor Clay Peterson, portfolio managers for the Hennessy funds and Memorial funds, respectively, believes the threat of higher inflation will tame the bull market. Both men see the indices heading higher over the next few years and contend that the postelection rally is a sign of good things to come.
One group that Hennessy says has seen some price appreciation in the past month but does not get the attention it deserves is the pure-play asset manager sector. He notes
( JNC) and
, as well as recent IPOs
Cohen & Steers
"If equity prices go up with a bull market, then the asset managers' earnings go up without even having to add a single new customer," says Hennessy, who was kind enough to mention for disclosure purposes that his own money management firm trades on the bulletin board under the ticker HNNA.
Peterson's approach to the bull market is similarly intuitive. He says he is eyeing publishers
( TRB) and
New York Times
Memorial Value fund, on the basis of the companies' ability to take advantage of an uptick in advertising as the economy strengthens.
And if you don't buy that line of reasoning, don't forget the other reason for buying newspaper stocks ahead of the holidays: The funnies section makes a great substitute for wrapping paper!