 UNITED STATES
Can It Get Any Worse?
So what's on your mind, Mr. Greenspan? In early January, the chairman of the Federal Reserve cut U.S. interest rates by half a percentage point. Investors at first regarded the news as a sort of late Christmas present. Both the Dow and the nasdaq spiked up sharply for a moment. But upon reflection, the haste of the chairman's decision — it came weeks before the next scheduled Federal Open Market Committee meeting, where rates are normally set — is a little spooky. Was Greenspan hoping to prevent a recession? Or was he desperately trying to cushion a "hard landing"?
The odds are against a full-blown recession in the U.S, but only just. On the upside, the oil prices that made such a muck of 2000 appear to have peaked, and a Bush tax cut may be in the offing, too. But banks — normally the first place investors turn to when the Fed cuts rates — are looking vulnerable to wobbly loans. Lots of well-known growth companies remain at lofty prices — Yahoo, though down more than 83% from its 52-week high, costs 66 times its earnings — so they could still fall even without a recession. For a good buy, you'll have to take a calculated risk on those weaker tech firms that were truly oversold in 2000, or stick with the old reliables.
AVX
This maker of passive electronic components — the sort of stuff you'll find in every mobile phone — isn't necessarily the best technology company you could ever own, but it has been taken down hard. Too hard, insists New York bargain hunter Marty Whitman, who owns it in his Third Avenue Value mutual fund. At $22 a share it's 55% off its 2000 high, and its price-earnings ratio of eight represents a deep discount to the U.S. market. If the economy perks up later in 2001, AVX and similar low-profile tech stocks will be on their way.
Berkshire Hathaway
When times are tough, it's always nice to have a genius like Warren Buffett on your side. Berkshire Hathaway, a holding company that includes everything from the newspaper in Buffalo to giant insurers, got clobbered in '99 for its lack of tech investments and because of weakness in the insurance industry. It has climbed back a good 32% over the past year and David Winters of the Mutual Series funds thinks Berkshire Hathaway is going higher. The insurance business is still improving. And Winters is impressed that while the rest of the market is freaking out, Buffett seems to be finding interesting things to buy dirt-cheap. He has recently snapped up paint company Benjamin Moore, carpet manufacturer Shaw Industries and, reportedly, even some junk bonds. You can pick up a "B" share of Berkshire Hathaway for $2,260.
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