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Taking Stock Of The Market

On Wall Street, 1999 was a year worth celebrating, a year of record highs, led by soaring tech stocks fueled by small investors. The big question: How long can this last?

On New Year's Eve, Early Show Financial Contributor Brian Finnerty and Mary Lisanti, executive vice president with Pilgrim Advisors Inc., spoke to Anchor Bryant Gumbel about the year past and what the future might hold.


"You have the Nasdaq, which is represented by the high technology sector, up 84 percent this year," said Finnerty. "That is unprecedented."

As a matter of fact, the Nasdaq Composite Index topped 4,000, up from 3,000 in seven weeks. "It took us a year to make it from 2,000," Finnerty added. "The bottom line is, we went up the first thousand in 24 years. The last thousand took seven weeks."

He said the market was driven primarily by "the whole thing of the new-age technology, the infrastructure behind it, the wireless companies; everything has contributed. We've seen this tremendous growth come in, and then it's become a momentum gain in terms of buying the stocks, and it feeds off itself."

Lisanti pointed out that "every time we have a recession and recovery, we get huge profits." A year ago, 60 percent of the world was in a deep recession. There were 151 interest-rate cuts worldwide.

"We threw money at the financial system like we've never thrown at it before, and the result is, the world recovers and profits explode. That's what is starting to happen. That's why technology is doing so well," Lisanti said.

It's a classic economic cycle, yet Wall Street has seemed surprised by this growth. "One of secrets is that there are very few experienced professionals in the market," Lisanti explained.

"The average person has less than 10 years in the market, and they haven't seen a big correction. A lot of people got out, and in the last few years this has been a profession that has grown. A lot of small investors know more the professionals on Wall Street," she said.

While the tech sector drove the market throughout 1999, both Finnerty and Lisanti foresee that it will broaden out in the new year. In fact, it is already happening in such sectors as health care, biotech and the drug industry.

Lisanti sees biotech as an especially big growth sector in the coming year. But she also said the best investment strategy is to "look at things everybody hates and see if there's something good there."

"To me, restructuring stories are always interesting or any companies with global growth. I like the financial sector, companies with proprietary patents," she said.

Finnerty's personal choice for the best stock of 1999 is Puma Technology, which gained more than 3,000 percent. On Dec. 30, 1998, it was trading at 2 7/8. A year later, on Dec. 30, 1999, it was at 112.

"That was a big mover," Finnerty noted. "But w've got to look forward and look for the next one." (When asked what the next one might be, Finnerty named Bluestone Software.)

Lisanti's stock pick for 1999 is Qualcomm, one of the best-performing stocks in the S&P 500 for the year, having gained more than 2,000 percent. (It was in the low 20s at the beginning of 1999 and ended the year at more than 600.)

Their market predictions for a year from now:

Finnerty: "Dow: I'll say 14,000, but I think it will hit 15,000 first and pull back. Nasdaq: I'm going to say it'll hit 5,000 and back off to 4,080."

Lisanti: "What you'll see is a 20 percent return on the Nasdaq and about 25 percent to 30 percent on the Dow. And the S&P will surprise everybody because I think it'll only be up about 10."

For now, the only thing that can really slow this market down, said Finnerty, is a hike in interest rates. "Feb. 1 and 2, the Fed is likely to raise rates. It's pretty much a foregone conclusion, could be the first glitch."

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