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Nasdaq Composite

is mired in two-year-low territory and the

S&P 500

is just about 20% off its highs. The economic outlook has everyone very nervous. And Timothy Ghriskey is psyched.

Tim Ghriskey
Senior Equity Portfolio Manager

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The senior equity portfolio manager at


-- he runs five value funds with $4 billion in assets -- believes the economy may have already hit its low point. He says the market may turn around as early as the second quarter, or early 2002 at the latest. Once it does, Ghriskey believes an upturn following so many quarters of depressed earnings will be certain and swift.

Before you write Ghriskey off as being as blind as Mr. Magoo, consider this: As fund skipper of the

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Dreyfus Aggressive Value fund, he had the composure and foresight to rack up a 21.4% return in 2000 on the back of utility, financial, health care and consumer-staples stocks. Now that we have your attention, we thought we'd chat up Ghriskey for today's Daily Interview to hear why he sees bullish signs amid a sea of bad news.

TSC: How concerned are you about the Nasdaq reaching two-year lows? Even though your Aggressive Value fund has only 10% of its assets in technology, are you worried about further weakening?


The press focuses too much on technology and Nasdaq, as if they were "The Market." Well, they aren't "The Market." In fact, while the Nasdaq declined 29.6% in 2000, the S&P 500 was down 5.3% and the average mutual fund declined only 1% or 2%. The Dreyfus Aggressive Value fund returned 21.4%. I hardly call that disastrous.

That said, if you are focusing only on technology, you still have to wonder if the market has totally capitulated on the huge technology valuation bubble that's been burst. The biggest lesson of the last six months is that technology can be an extremely cyclical industry. In a consumer-led economic slowdown, it's probably not that cyclical, but in a capital-spending slowdown -- which is really what this one is -- it's a very easy budget for CEOs, CFOs and corporate managers to cut.

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When we finally see the economy recover, the earnings of these

technology companies could accelerate really quickly because they are coming off such low earnings. So, no, I'm really not that concerned about Nasdaq. We want exposure to technology because we see so much value there.

TSC: When do you expect the economic recovery to happen and how are you putting money to work in anticipation of it?


The consensus has been that we are going to have the recovery in the second half, with the emphasis recently moving to the fourth quarter and some even saying the beginning of '02. It could happen earlier. The consensus is often wrong. If it happens sooner, technology stocks will be very strong. If it doesn't happen by the second quarter, though, we believe that the recovery will be delayed through the summer months, and we might lighten our technology exposure.

All the pessimism out there right now, to me, is reason for optimism. I believe we have hit bottom. After the first or second easing of interest rates, when the market retraces growth -- that's often the low point.

TSC: The Fed has signaled it will be aggressive in cutting interest rates. This week we've seen some economic indicators that are somewhat inflationary. Are you concerned at all about inflation?


All of the inflationary indicators that have come above expectations are not sustainable inflationary factors. The

Organization of the Petroleum Exporting Countries

nations are much more organized and cooperative with each other than they have been historically, and they seem to agree on keeping crude oil in a $25 to $30 band. So, no, we don't see inflation as a big concern and we don't think that it is going to affect rate cuts.

TSC: How do you find investment opportunities in this market?


The erratic market that we are now in, with a lot of sector rotation, is actually a normal market. I tell my stock analysts not to focus on the economy or sit there obsessing about the tape, but to focus on their sectors to find the individual stocks that will outperform their peers, or the "broken growth" companies with problems that are about to be fixed. That's all you have to worry about.

I like to populate a portfolio from as many different angles as possible, with some broken growth stocks, some perpetually inexpensive stocks, some potential takeover plays or potential restructurings, and even companies that look like they may come out with earnings surprises.

TSC: What are some of the stocks that you currently like?


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