Investment savvy and a keen knowledge of market psychology make Ken Fisher one of my favorite Money Show speakers. He has also just become the fifth longest-running financial columnist at Forbes. Here's a sampling, with a trio of potential takeover targets.
"With this issue I overtake Sidney B.
Lurie to become the fifth-longest-running financial columnist in Forbes' 88-year
history. Lurie wrote between 1954 and 1976. A lot of what he said back then
about market psychology is still valid today. Lurie, who died in 1985, had been
research head at Paine Webber, where he wrote the world's first recurring
brokerage house market letter. A generalist covering a wide array of topics, he
was a marvelous writer and also a marvelous excavator of obscure facts.
"He knew then what you
need to know now, that it is pointless to make investment decisions
unless you are doing so based on information you don't think others widely possess.
Otherwise you would be better off in an index fund, since you will just get
lucky sometimes and unlucky others.
"In a world with much less information
flow than ours Lurie devoured obscure industry trade
journals, often extracting a minor footnote about inventories or a new product
and building a theme around it. In his very first column he said, 'The market
usually rings a bell before changing direction, but few people hear it.'
"He knew that to see the market right you also had to see it
'colorfully,' by which he meant big bright themes that might now look like a
color PowerPoint pie chart. He coined the terms 'Fabulous Fifties' and 'New Era'
to describe the 1950s (when the S&P 500 rose more than 19.2% annually), not
believing that the market had to go down in the latter half of the decade just
because it had done well in the first half.
"He wasn't a permabull or permabear. He was always looking for the turn but could remain bullish or bearish longer than most investors because he knew trends usually extend to extremes. Today's bevy of believers in the inevitability of rapid reversion to the mean could learn lots from Lurie. I remain bullish and believe that buying pressure will continue from companies using their excess cash and low after-tax borrowing costs to either acquire competitors or shrink their own capitalizations in buybacks.
"Meanwhile, with a a takeover theme, I
offer some plausible acquisition targets with which you can win whether
they are taken over or not.
"Toronto's Inco (N NYSE) is the world's second-largest producer of nickel after Russia's
Norilsk Nickel. This widely used industrial material is a component of stainless
steel and shows up in hundreds of thousands of products; its price has climbed
330% over the past 20 years to $13,380 a metric ton. At 16 times this year's
earnings, Inco carries a market value of $9 billion and would be an easy,
profitable acquisition for any of numerous natural resource companies. If it
isn't acquired, it is still a good stock.
"Belgium's Delhaize
Group (DEG NYSE) is a gradually growing food retailer with 2,500 stores on three
continents. In the U.S. it has Food Lion, Hannaford and Kash n' Karry. Delhaize
has recently expanded into faster- growing eastern Europe and Asia. At 14 times
this year's earnings it's a cheap way to get moderate growth. Its $6.6 billion
market cap, with $22 billion in revenues, makes it affordable to competitors and
private- equity firms alike. There are no control positions to block a takeover.
"PerkinElmer (PKI NYSE) is one of the grand old brand names in analytical instruments sold
to the health sciences world. If health care does well in the decades
ahead--highly probable, given aging demographics--PerkinElmer should do well.
You can be proud of this stock in its own right, but it would make a marvelous
product-line extension for any big health care outfit. It sells at 16 times 2006
earnings."
