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The rapid consolidation within the the banking and thrift industries has led to few legal differences between banks and thrifts, and more thrift mergers are expected within the next three to five years. The insurance playing field for thrifts and banks has been leveled by congressional action, and the two industries are more competitive. Many thrifts have become takeover targets, and investors need to evaluate these stocks on an individual basis.

First quarter, 1997 thrift industry earnings and market conditions showed favorable results despite increases in short-term interest rates, although equity prices dropped in the last portion of the quarter from highs reached in February and March. The drop in equity prices is a boon for short-term investors and the continuation of mergers throughout the industry will benefit patient long-term investors, despite the high 130% to 170% of book value buyout prices.

The petroleum services industry and oil field equipment and supplies industry had possibly the best stock price and earnings results of any industry in 1996 and, although Jan 1997 saw a downturn in these results, despite overall market increases, these equities will be leaders for 1997. Recent trends in consolidation, energy consumption, economic growth and technologies will please both short and long-term investors. Individual Safety rankings should be examined before investing in specific companies.

Stock prices for the thrift industry have increased in 1996 and early 1997 with earnings gains and the expectation of takeovers. The number of savings and loan associations has decreased from 3,000 to 2,000 from the mid-1980s to the mid-1990s, and the industry is expected to shrink further in the next three to five years. Most of these stocks are good targets for takeover, but investors need to use patience when evaluating these securities.

The Midwestern banking industry has become more timely as of Jan 1997 and rankings for these stocks are expected to rise. Higher loan loss provisions and weaker commercial loan demand slowed Midwestern bank earnings growth in 1996, and loan loss provisions are expected to remain high in 1997. The prospects for these stocks for the next three to five years are reflected in their price levels, although several stocks are favorably ranked for 1997.

The debt/capital ratios and book values of companies in the property and casualty insurance industry have been raised by the drop in interest rates. However, lower interest rates hurt earnings for the industry with slower investment income growth and higher capital amounts, which puts pressure on rates and lowers profit margins. Although there are some strong companies in the industry, current multiples cannot be sustained through the year 2000.

The petroleum services industry and the oilfield equipment and supplies industry stocks have the highest timeliness rating of any industry, have shown record growth and profits over the last ten months, are seeing a rebirth of offshore oil and gas drilling and a jump in stock prices that make many companies' securities a prized investment. Mergers, acquisitions and consolidations during the past years' along with carefully planned price slashing, have given these industry stocks the good results that investors seek.

The thrift industry will experience several takeovers from 1996 through 2001. The industry has an abundance of capital that is utilized for stock buybacks, acquisitions and dividend increases in 1996. The satisfaction level of thrift stockholders has remained high during the early 1990s. Thrift profits are also increasing.

The real estate investment trust industry has an average rating for timeliness of investment. These stocks are good for diversification of a portfolio and have good returns and liquidity. Management performance is important when investors select a specific real estate investment trust. Management teams provide added value if they are efficient and are experts at finding good investment opportunities.

Small capitalization stocks within the property/casualty insurance industry are favored in 1996. There are also opportunities in the reinsurance segment of the industry. Revenues and earnings are not rising because of catastrophe and weather-related losses. Favorable reserve development has also decreased. Many insurance companies are restructuring.

The share-price and earnings momentums of the banking industry in the midwestern US are having difficulties. As a result, it is not a good investment. Stock performance has been good because of the belief that there will be additional banking industry consolidation in the future. Profit growth is expected to continue in 1996 and 1997 but not at the pace of 1995.

Consolidation in the oilfield services and equipment industry has become increasingly important after the collapse of the oil boom in 1983. However, the fleet of mobile offshore drilling rigs has decreased, and rising drilling demand is driving rates upwards. Offshore rig operators' earnings are likely to rise for the next three to five years as a result. These stocks are now timely and long-term investors will be well-rewarded.

The real estate investment trust (REIT) industry is analyzed with recommendations on individual companies. The California real estate market is improving and REIT performance is expected to follow. Regional malls, poor performance during much of 1995, is apparently rebounding during 1996. REITs are considered fixed-income equivalents, and investors should consider earnings growth, capital structures and payout policies of the individual stocks when investing.

Mergers and acquisitions mark the thrift industry, the number of thrifts has dropped from roughly 3,000 in the 1980s to roughly 2,000 in 1996. More consolidation is expected. Proposals to bring parity with banks in deposit insurance could make the segment more competitive. Investors in this segment should be prepared to wait for increased return.

Stocks of midwestern banks have become less timely in 1996 with lower earnings and share prices underperforming the market. Profits have become lower in 1996 with higher loan loss provisions and slow commercial loan growth, and these trends are expected to continue through 1997. Midwestern bank stocks are expected to underperform the market in 1996 and 1997, but there should be profit growth for several banks through 1999-2001.

Rising long-bond yields and low growth are making property and casualty insurance stocks less attractive in 1996. Continued industry consolidation and less demand for reinsurance has resulted in an increased focus on expenses, and companies with high expenses have become less competitive. These stocks have underperformed the market in 1996, and possible lower earnings, along with interest rate risk, make them average investments for 1999-2001.

The industrial services industry reports good earnings in 1996 in response to economic expansion, and profit growth is expected to continue in 1997. Market consolidation in the industry and increased outsourcing in the 1990s by government and business are having a positive impact on these companies. These stocks are timely for 1996 and 1997 and will outperform the market, and many offer growth potential for the next three to five years.

The number of offshore drilling rigs has decreased to about 575 in 1996 due to lower daily rental rates. Increased drilling activity for petroleum and natural gas in 1996, however, is giving suppliers and offshore drillers greater earnings prospects for the next three to five years. Coiled tubing and 3D seismic are among technologies that are becoming important, also. Investors for the long term will find several good stocks here.

Savings and loan association securities and equities are expected to offer investors superior returns on a long-range basis despite their showing only minor price changes in the 1st qtr, 1996. There appears to be a rush for thrifts to acquire, merge or consolidate and these actions have caused prices to increase 130% to 170% over book value. However, investors must be patient and await these events to take place.

Investors, seeking the high current income and moderate long-term growth offered by real estate investment trust (REIT) stocks and equities, should disregard dividend yields and focus on the management teams of individual REIT company's ability to evaluate and enhance real property. REIT securities have generally performed below average in the recent past but shopping center REITs may become valuable as retail sales improve and mergers and consolidations occur.

The property and casualty insurance industry had good earnings in 1995. In the 1st qtr of 1996, however, storm losses, charges for asbestos and the environment, and lower premium growth have hurt some companies. Lower costs in commercial casualty and personal lines are benefitting insurers, but 1996 will be uncertain for reinsurance. Profitability will improve in 1996 and there are several good opportunities for investment among these stocks.

Midwest bank earnings and stock prices rose in 1995 and the 1st qtr of 1996, with greater merger activity, improved operating efficiency, and strong loan demand. Lower credit quality, bigger loan loss provisions, and absorption of price/earnings ratios by the market may inhibit growth in 1996, however. These stocks are volatile for 1996, ranked only average for timeliness, and are fully valued, but several are good selections for investment.

Stocks in the oilfield services and equipment industries outperformed the market in 1995. Oilfield services companies are consolidating to absorb the overcapacity which has plagued the industry since 1983. Oilfield equipment will be in greater demand in the late 1990s, and technological innovations for equipment are becoming economically more important. Individual stocks must be researched, especially for safety, before investment.

Thrift industry stocks outperformed the market in 1995. ATMs and other technologies are improving efficiency, and lower interest rates will increase loan activity and earnings. Competition and merger activity will improve with a special Savings Association Insurance Fund charge, and thrifts are now stronger after the 1980's S&L crisis. Investors should choose thrift stocks with strong balance sheets for commitment.

Returns for real estate investment trusts (REITs) were in the low double digits in 1995, somewhat less than the market as a whole. Shopping center REITs underperformed the market with weak retail results, especially during the 1995 holiday season. Funds from operations, which is net income plus depreciation less capital gains, is the usual cash flow measure. Investors in REITS should seek stocks which follow conservative guidelines.

Property and casualty stocks outperformed the market in 1995 although earnings were uneven. Wider workers' compensation margins, catastrophic event exposure in property and casualty lines, and cost disinflation in auto insurance are the major trends that will impact earnings. There will be more consolidation and restructuring in this industry and investors need to concentrate on stocks with good reserves and financial stability.

Midwestern banks will have good margins and growth in 1996, but not at the same level as 1995. Earnings gains will be steady with bank consolidation, improved asset quality, and higher productivity, along with lower premiums from the FDIC. Midwestern bank stocks are not timely for 1996, but there are exceptions, such as Star Banc, Northern Trust, and First Bank System. The returns for these stocks through 1998-2000 have more potential.

Slightly increasing oil prices will aid the oilfield equipment and services industries, but land drilling will decrease with the 20% drop in natural gas prices in 1995 from 1994. Oil companies are also subcontracting out more often. Offshore drilling is improving due to a royalty relief bill, 600 undrilled leases located in the Gulf of Mexico, and technological innovations. Several stocks are attractive, even with uncertain prices and other risks.

The major activity of the thrift industry, whether savings banks or savings and loans, is mortgage lending. Federal and state regulations which have restricted thrift growth have been struck down after the savings and loan crisis. Thrifts have expanded by merging, which has also resulted in cost-cutting and streamlining measures. Although the Savings Association Insurance Fund is not in good condition, thrifts with good balance sheets may be good investments.

Companies which provide traditional oilfield services, technology, and quality will benefit from higher oil prices, while natural gas drilling will be limited due to depressed prices. Offshore drilling rates have recovered to $120,000 a day for rigs that can operate in harsh environments and deep water, and industry consolidation is increasing. These stocks will outperform the market for the next three to five years.

Higher earnings, share repurchases and consolidation are boosting thrift stock prices, making these institutions a good investment bet, at least through 1998. The consolidation trend will continue through the remainder of the decade. Investors should choose those thrifts that are highly capitalized. They should also scrutinize an institution's lending practices. The stock of GreenPoint Financial Corp is highly recommended.

Real estate investment trusts (REITs) have turned in mediocre performances in 1995. Depressed consumer spending and the imminent reorganization of the retail industry, a leading REIT sector, have discouraged investment in REITs. On the bright side, declining interest rates have spurred REIT acquisitions. REITs remain a good vehicle for income growth, but investors should limit themselves to highly capitalized companies with strong balance sheets.

Prospects for Midwest bank stocks in 1995 are only fair, but projected double-digit earnings share increases for these banks over three to five years make them good long-term investment bets. Still, Fifth Third Bancorp, Norwest Corp and Star Banc are timely choices. In 1995, falling interest rates will bolster bank earnings, but declining yields for bank stocks and a slowing economy will put pressure on margins.

Property and casualty stocks, and reinsurance stocks in particular, are doing well. The latter are benefiting from the feeling that there is increased risk in the primary market. Overall, the property casualty insurance industry has accumulated a surplus since Hurricane Andrew. The 3-5 year earnings growth potential of three of the four reinsurance stocks tracked is excellent. They should yield returns in the mid-teens or higher.

Rising natural gas and oil prices in the 2nd qtr of 1995 have allowed oilfield service and equipment stocks to outperform the market. This is expected to continue for 1995 and 1996, especially for international and technologically innovative companies. Timeliness rankings have improved for this industry and Halliburton is ranked 1. These stocks will have good returns for the conservative investor.

Real estate investment trusts (REITs) have underperformed the market in 1995. Since REITS must pay out at least 95% of income as dividends they have entered the capital markets to preserve their equity. Investors will find REITs a good investment if they desire moderate growth and income through the year 2000. An able management team, low dividend ratios, and a good balance sheet are assets to consider.

The savings and loan crisis of the early 1990s eliminated the weaker thrifts, with many of the remaining converting from mutual to stock form. Shares are being offered at 65% or less of book value, first to employees, then to depositors, and then to the public. Thrift consolidation will continue over the next 3 to 5 years, with some of the better takeover targets being suitable investment selections.

A flat yield curve has kept Midwest bank earnings low through 1995, and 1996 profit margins are not likely to improve. Higher short-term interest rates, along with lower deposit bases and other factors, have made current bank funds more costly. Midwestern bank stocks are not good investments for 1995, but earning possibilities for the next 3 to 5 years should make them good performers by 1998-2000.

Financial reports for the 1st qtr of 1995 indicate that the earthquake, in Kobe, Japan, did little harm to property insurers, and the rest of 1995 should remain profitable. Commercial line underwriters are having better premium and ratio gains than those which carry personal lines. Insurance stocks will underperform the market in 1995, but good earnings give defensive protection to investors.

Prices for natural gas and oil are expected to improve from their 1994 lows. Companies in the oil field service and equipment areas, especially in North America, are forecast to improve earnings in 1995 and the long-term future along with this price recovery. Overcapacity in these industries has led to mergers and consolidation. Conservative investors may benefit from ownership in several of these stocks, especially those that are internationally active.

Thrifts are expected to be entering a period of consolidation and acquisition in the next few years, which should influence stock prices up over the long run, and make for a healthier market. Government regulation has caused the enlargement of the industry, and deregulation will make for improved earnings for some, and consolidation of others. The industry's relative strength has declined tenfold since 1988, and investors should be cautious about acting too quickly.

The Federal Reserve Board's decision to increase interest rates in 1994 damaged the strength and stock prices of real estate investment trusts (REITs), and this trend will continue as long as the Fed maintains a tight monetary policy. The extremely low prices of some REITs might be attractive to investors, and real estate fundamentals will be good in 1995. However, investors should be prepared for lower yields and falling stock prices unless interest rates begin to fall.

A strong Midwestern economy is boosting loans in that region, making bank stocks there a good investment bet through the 1990s. Moreover, Midwestern banks enjoy the lowest problem loan and charge-off ratios in the industry. On the downside, these banks are beset by shrinking lending margins, sluggish fee income growth and charges against depreciating securities portfolios.

The property casualty insurance industry is benefiting from a resurgent bond market, but in general the industry will underperform most others in 1995 and be a poor investment bet. The commercial casualty business has the most room to grow because of low prices. Automobile lines continue to be profitable, accounting for the largest share of premiums in the industry.

Oilfield service industry firms have proliferated during the 1980s, and, as a result, many companies have struggled to survive during the 1990s. The industry is undergoing consolidation, and the surviving firms are lean and strong. New technology, such as direction drilling, subsea completions, coiled tubing and 3D seismic, are given an added boost to operations. Investors will find opportunities within the industry, but safety rankings are important to observe.

Investing in real estate investment trusts should be done carefully because an increase in interest rates has caused a decrease in the value of the trusts. An investor should evaluate trusts over the long term and determine the solidity of their balance sheets. Those trusts with large capitalization rates will be able to enter the equity market more easily. Finally, the high yields of a trust is more important than dividends.

Individuals should invest in the stocks of thrifts that have high financial strength and high safety ratings. The industry is currently in the midst of numerous acquisitions and consolidations. The volatility of interest rates during 1994 caused individuals to refinance homes and to purchase new homes. This activity has been beneficial for the thrift industry and further increases in interest rates will increase the economic wellbeing of the industry.

The prospects for Midwestern banking firms' stocks are evaluated. The growth of banks' fee-based earnings has slowed, raising questions about efforts to expand fee-based businesses. Interstate banking legislation could prompt increased acquisitions activity, concentrated primarily in states that have had restrictive interstate banking laws. Evaluations of individual stocks are included.

The prospects for property/casualty insurance stocks are evaluated. The performance of property/casualty stocks has been dismal in 1994. Insurers' earnings have picked up, but they are still unspectacular. Investors could be overplaying several problems facing the industry, such as the impact of Superfund reform legislation. Evaluations of individual stocks are included.