'I'M CONCERNED THAT EARNINGS WILL DISAPPOINT'

H. Bradlee Perry is the retired chairman of the Cambridge (Mass.) investment firm David L. Babson & Co. He still manages accounts and writes investment commentaries for the firm.

ON INVESTOR SENTIMENT: ''I've never seen more enthusiasm for equities and such expectations for what equities will do for them. There was a lot of enthusiasm for stocks in the go-go days of the 1960s, but that was more speculative. People didn't put their retirement money into stocks.''

ON THE PROFIT OUTLOOK: ''I'm concerned that earnings will disappoint. We've been operating at the highest level of profitability ever and that may not be sustainable. Growth is slowing, and you're already seeing serious competitive pressures.''

ON INVESTMENT STRATEGY: ''Buy the companies that are No.1 or 2 in their industries and are low-cost producers. They'll best be able to weather a slowdown. Drug companies are good because patents give them some protection from competition. I also like bank stocks, which should do well as the industry consolidates.''

ON MARKET TIMING: ''Trim back your holdings, but don't sell it all. It's more important to be in the stock market when it's going up than out when it's down because the advances are much greater than the declines.''