BW Online | October 24, 2001 | Fund Managers See Recovery in the Cards

BW MAGAZINE Get Four Free Issues Subscribe Customer Service

ONLINE FEATURES Book Reviews BW Video Columnists Interactive Gallery Newsletters Past Covers Philanthropy Podcasts Special Reports BLOGS The Auto Beat Byte of the Apple Europe Insight Eye on Asia Getting In Investing Insights The New Entrepreneur NEXT: Innovation Tools & Trends On Media Technology at Work The Tech Beat Traveler's Check TECHNOLOGY Product Reviews Tech Stats Hands On AUTOS Home Page Auto Reviews Car Care & Safety INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip FINANCE Investing: Europe Annual Reports Bloomberg BW50 SCOREBOARDS Hot Growth Companies: 2008 Mutual Funds Info Tech 100 B-SCHOOLS Undergrad Programs Rankings & Profiles

BW EXTRAS BW Digital BW Mobile Podcasts RSS

RSS Feeds

Reprints/ Permissions Conferences

OCTOBER 24, 2001

FUND INVESTOR

Fund Managers See Recovery in the Cards
The keys, according to these pros: Fed rate cuts and an easing of terrorism worries

STORY TOOLS

E-Mail This Story

Fund Investor : Fund Strategies Archive

PEOPLE SEARCH

Search for business contacts:

PREMIUM SEARCH
Search by job title, geography and build a list of executive contacts

The U.S. economy has dipped into a recession, partly due to terrorism fears, but the economy will rebound next year, when the Federal Reserve's rate cuts take effect and anxiety about terrorism subsides, several fund managers said.

"We are in an normal business downturn, but business cycles self-correct," said Ron Muhlenkamp, president of Muhlenkamp Funds, speaking at a New York press briefing. Muhlenkamp is bullish, because he feels the Fed will lower interest rates until the economy rebounds, and based on historic patterns, "consumer fears generally dissipate after six months."

Muhlenkamp feels the economy could lose more ground, so he's buying consumer cyclical companies. Right now, he calls housing the "only attractive sector." He currently owns Citigroup (C ) and Cement de Mexico.

George Schupp, manager of First American Bond IMMDEX Fund (FRBMX ), agrees that the Fed will aggressively cut rates to jump-start the economy. Historically, the Fed has brought interest rates down to the rate of inflation during downturns, so Schupp expects a cut of 25 basis points next month and possibly another 25 basis points in December. When the economy rebounds next year, Schupp predicts the Fed will raise rates.

The market could fall further this year before the economy improves, according to Bill D'Alonzo, co-manager of Brandywine Fund (BRWIX ), who feels the price-earnings ratio of the S&P 500 will fall further. Based on this defensive outlook, D'Alonzo currently favors health care (40% to 50% weighting), energy, and grocery stores as his largest sectors. His picks include Alcoa (AA ) and General Electric (GE ).

Bob Millen, manager of Jensen Portfolio (JENSX ), looks beyond current market and economic conditions to focus on companies profitable in all environments. Despite this view, Millen believes, "now is a good time to buy cyclicals," because they are hardest hit in downturns. Millen concentrates on companies with 15% annual returns on equity over the last ten years. His long-term plays include Pfizer (PFE ), for its strong drug pipeline, and Stryker Corp. (SYK ) for its steady earnings stream.

Get BusinessWeek directly on your desktop with our RSS feeds. XML

Add BusinessWeek news to your Web site with our headline feed.

Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.

To subscribe online to BusinessWeek magazine, please click here.

Learn more, go to the BusinessWeekOnline home page