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The special lines retail industry is comprised of a variety of sectors and companies, the prospects for which are mixed in the late 1990s, but good earnings are forecast for 1999 and the year 2000. Retailers which are able to cater to the specific needs and tastes of consumers are in the best position for future gains, and most retailers are taking advantage of the growing electronic commerce trend. These stocks are timely in 1999, but not stable, and investors must be selective, especially for the next three to five years.

Results and prospects for 1999 remain mixed for the retail store industry, especially with same-store sales in the department store segment. The market share for discount stores continues to increase at the expense of department stores and sales opportunities are increasing with the Internet and electronic commerce. Retail industry stocks are timely in 1999, but investors will find that many are volatile selections, as well.

Earnings results for the clothing industry during the first half of 1999 were wide ranging with no segment doing poor or good with restructuring in the industry and changed retailer buying habits. Consumer purchasing trends are changing the industry, as well, and internal growth is difficult with the maturation of this segment. Investors need to select those stocks which have the best brands and the ability to survive and make acquisitions.

Markets for the paper and forest products industry have begun to improve in the first six months of 1999, and prices for these products seen to have bottomed out but remain modest in some areas. Operating costs in the industry have been lowered and the supply of paper remains in check by consolidation in the industry, which is likely to continue. These stocks are expected to perform with or trail the market in 1999 and the year 2000 and few of these issues are recommended for investors.

The booming construction market in the first six months of 1999 has been good for the cement and aggregates industry with higher product demand coupled with lower production costs. Increased transportation spending, the expansion of capacity, and industry consolidation are enhancements for this sector, as well. These stocks are expected to outperform the market in 1999 and most companies in this industry have potential for the next three to five years.

Mortgage availability, the strong US economy, and demand for housing have been beneficial for the construction industry in 1999, but industry stock prices have not reflected its earnings. This industry has historically been fragmented, which has both advantages and drawbacks, but the industry has been able to improve their approaches to the construction process. Most of these stocks are expected to do well in 1999 and for the next three to five years, as well.

Residential remodeling and new-home construction have created a high level of demand for the products of the building materials industry, which has resulted in pricing strength for the industry. Activity in the housing market is expected to decline, but this should be offset by new activity in the non-residential sector. The long-term fundamentals for these stocks remain good, but caution is advised for investors in mid-1999 due to rising interest rates.

The special lines retail industry is comprised of a wide variety of stores, for which prospects are diverse, and many will not be able to translate good consumer spending into earnings performance. Execution is important to success in this competitive industry, as merchants must anticipate the habits and tastes of consumers, and online retail strategies have become a permanent part of the industry. These stocks are expected to do well in 1999, but investors should select only those whose prospects for growth are well-defined.

Better earnings in early 1999 have made the apparel industry more stable after poor sales in the fall and holiday selling seasons in 1998. Struggling niches and easy to copy and unoriginal designs have made it difficult to become competitive in an mature market and an industry that is going through a period of consolidation. These stocks are not timely in the 2nd qtr of 1999 and investors need to show caution and be selective in their commitments.

Below par prices for paper and lumber, ranging from 10% to 30%, has created pressure for profits in the paper and forest products industry in 1998 and 1999, with low demand and overcapacity being the reasons for the slump. Most of the companies that comprise this industry are taking steps to reduce costs, and increased acquisition and merger activity is expected to continue in the years 1999 and 2000. Weak earnings have caused these stocks to be unfavorably ranked for 1999, but there are several that are attractive for the longer term.

High employment, moderate economic growth, and low interest rates have led to increased demand for the products of the cement industry in the US and a corresponding raise in prices for these products. Industry expansion and consolidation, along with this demand and imports from outside the US have given this industry good long-term prospects for the years 1999 and 2000. These stocks are timely for the next six to 12 months and for the next three to five years, as well.

Demand for building materials industry products remains strong with the 1.1% jump in construction starts in Feb 1999, and the similar strong non-residential construction in the US. There has been a basic shift in the distribution channels for this industry, which is consolidating at a rapid pace, and building material retailers are dealing with manufacturers more directly than in previous years. These stocks are expected to remain strong for the next two years, but there is the risk of added industry capacity.

The foreign investment company industry is comprised of a number of closed-end funds which seek to invest in a wide variety of world markets and which usually have a price discounted from share values. The world economy outside of the US continues to be bleak in the late 1990s, but these funds have the advantage of one-stop shopping for investors. Each fund needs to be separately analyzed apart from the industry as a whole, as economic and other conditions vary from one individual country to another.

The retail (special lines) industry is comprised of a wide variety of subgroups and companies that cannot be analyzed and evaluated as a broad category, and these stocks must be individually evaluated. Results for the holiday shopping season in 1998 were satisfactory for most retailers, and the US economy is poised for growth in 1999 which augers well for the retail industry. These stocks are not strong in 1999 and investors need to be selective both for the short and long term.

Most apparel manufacturers had a disappointing holiday selling season in 1998 and the weak retail environment was exaerbated by warm weather in the US at the same time. The apparel industry is also quite competitive, but electronic commerce, brand leveraging, and improved efficiency may help the industry in the future. These stocks are not timely during the 1st qtr of 1999 and investors should select only the most timely of the larger capitalized companies.

The forest product and paper industries are facing difficult market conditions in the late 1990s and lumber and several major paper grade prices have declined in 1998 from 10% to as much as 30%. The elimination of excess supply and capacity is a major problem for the industry, but the trend toward consolidation may alleviate the situation. These stocks are expected to lag or mirror the market in 1999.

The increase of housing starts and residential construction in late 1998, along with the Federal Highway Spending Bill, has increased the demand for cement and aggregate materials in the US. Several producers are planning to expand production capacity at their facilities to meet the market created by better US economic conditions, and strategic acquisitions are being pursued, as well. These stocks are cyclical, but most have good potential for growth over the next three to five years.

Excess global capacity and sluggish demand have created earnings pressure for the paper and forest products industry in mid-1998, and the stronger dollar has allowed cheaper paper to be imported into the US. Lower paper and lumber prices are among the reasons the industry needs to consolidate, but newsprint prices are firm as of Sep 1998. These stocks are expected to lag the market in 1998 and 1999.