Search

Stocks in the foreign electronics and entertainment industry have increased in value during the latter part of 1999 due to the improved Japanese economy and other factors. The Japanese semiconductor industry has been helped by earthquakes in Taiwan and new technology, such as digital video disk will help electronics industry earnings in 1999. Prospects for these stocks, for both the short and long terms, remain divergent, however.

The educational services industry remains financially in late 1999 due to the strong economy luring students from schools and rapid expansion putting operating margins under pressure. However, several fundamental factors, such as demographic trends and wage differentials between degreed and non-degreed employees, remain solid. The industry can expect earnings growth of 15% to 30% through the years 2002-2004 and these stocks are expected to due well within that time frame.

The food industry is in the processing of change due to consumer demand for convenient and healthy food choices and the organic and natural food sector is growing at a 10% to 12% annual pace in 1999. Results are also being strengthened by marketing leverage across product lines and the divestiture of non-core businesses. Most of these stocks are not timely for 1999 and the year 2000, but several have price appreciation potential.

Weak overseas demand and interest rate fears have negatively impacted several paper/forest products industry stocks in the Jul-Oct 1999 period, but those concerns appear to be overblown. Most of the paper industry stocks tracked by Value Line are expected underperform or match the performance of the general market in the Oct 1999-Oct 2000 period.

The household products industry is mature, overall, but product innovation, brand awareness, and intelligent acquisitions can still spark healthy profit growth. Proctor & Gamble, one of the industry's bellwethers, has entered a sponsorship deal with Yahoo!, in hopes of enhancing brand awareness among younger consumers. Aggressive investors are advised to consider Oneida shares, and Scotts may be suitable for investors looking for three-to-five-year capital appreciation.

The companies which comprise the medical supplies industry have grown and diversified in the 1990s mainly through acquisitions and this trend to consolidation is expected to continue in 1999 and the year 2000. Stock valuations for the industry, however, have decreased in 1999 and there are concerns about the effect of rising interest rates on stock prices, as well. These stocks are expected to perform with the market in 1999 and the year 2000, and investors need to be selective in their options.

The good economic conditions in the US are benefiting the automobile and truck industries and demand is being fueled by growing disposable income, strong consumer confidence and good job growth. However, competition is intense for market share in the US, and the product mix is likely to change in the future. These stocks are timely in the 3rd qtr of 1999 and value-minded investors should find some good selections in this industry.

The educational services industry is comprised of companies which serve the post-secondary education market in the US and has annual revenues of $225 billion, about 3% from for-profit companies. Slow enrollment growth and narrowing margins have been recent problems for the industry, but foundations for earnings growth over the years are being laid, and distance learning is expected to be an advantage, as well. Growth rates for this industry are expected to be from 15% to 39% over the next three to five years and patient investors will be rewarded with good long-term apprecaition.

Profits for most of the companies which comprise the foreign electronics and entertainment industry have been hampered by unfavorable exchange rates in 1999, but there is strength in the semiconductor area. Sales of digital video disk and similar products have resumed their upward rend after a post-holiday drop, and this is expected to continue in the future. These stocks are not timely in 1999 and have little long-term appeal for investors, except on a selective basis, for the nest three to five years.

Cost control with the aim of income and earnings growth has become the major management trend in the food industry in the late 1990s after several years of overseas expansion, mergers, and acquisitions. The small- and medium-sized consolidators have been the best performers in the industry as expansion is no longer the best method for growth among the larger companies. These stocks are not timely in 1999 and investors have few selections for stock price growth.

The integration of acquired companies and the restructuring of operations for the next century are two of the challenges that the household and consumer products industry faces in 1999. Some of the higher priced stocks in this industry have lost value due to recent interest rate rises and conservative investors may find opportunities here. Good revenues and financial strength could make several of these stocks attractive if interest rates increase, but few have potential for the next three to five years.

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.

There has been a price erosion for the stocks in the medical supplies industry in early 1999 due to legislative concerns, rotation of investor sentiment in the market, and rising interest rates. However, the increased standards of living around the world, the aging population in the US and other industrialized countries, and new products are favorable for the industry for the long term. Investors will find some worthwhile stocks in this sector, but they need to seek the best prospects in terms of stock price and product diversity.

US sales of automobiles and light trucks are expected to decline in 1999 to 15.5 mil units from the 15.6 units sold in 1998, due mainly to lower US economic activity and softer North American demand. Automobile industry labor problems with the United Automobile Workers have improved in recent years, but there is a possible strike on behalf of car haulers by the Teamsters Union. These stocks are expected to perform well, with Ford Motor Co one of the better selections for investors.

Wage differentials between those with and without college degrees, demographic trends, and the shift to a knowledge base in the US economy are some of the factors which will grow the educational services industry. Degree programs that focus on technical skills which will better meet employer and student needs in the future are offered by most of the companies in this industry, which accounts for about 3% of the revenues in this economic sector. These stocks are favorably ranked for investors in 1999 and through the years 2002-2004.

The strong Japanese yen and British pound, along with the weak economy in Japan, have adversely affected the financial results of many foreign electronics and entertainment companies in 1998 and 1999. Legislation in the US, the divergence and obsolescence of some technologies, and changes in consumption are some of the trends that are affecting these industries as well, although there is some improvement in the semiconductor business. Investors need to be selective as these stocks are only mid-range in timeliness.

Sales and earnings comparisons in 1998 and 1999 have been tough for several of the companies which comprise the food industry due to the maturation of developed markets and the economic turmoil overseas. The switch from defensive stocks to more cyclical issues along with stocks in the high-tech industry by investors are two additional problems that the industry faces. Investors in food industry stocks need to be selective and make commitments only to the most timely issues.

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.

Through the 1990s, many of the companies in the medical supplies industry achieved growth through research and development and market expansion. The acquistion of companies now appears to be the favorite means to achieve growth. This trend is expected to continue for the next two years. Investors are encouraged to select companies having a well rounded product base.

US sales projections for autos and light trucks are being increased due to strong sales during the first quarter of 1999. However, it is believed that future environmental emissions legislation could affect industry profits. Auto stocks are expected to do well in the near term, due in part to low interest rates and strong consumer confidence, which should translate into continued strong sales.

Demographics, wage differentials for educated people, and the continued shift towards a knowledge base in the US economy are the fundamental factors which have led educational services industry stocks to be timely in 1999. Growth in the US economy will be driven by information technology and many of the companies in the educational services industry offer training in this area. Earnings growth for these stocks is projected to be from 20% to 30% through the years 2001-2003.

The weakness of the yen against the dollar which allowed Japanese consumer electronics companies to achieve record profits in the first half of 1998 has been reversed and this may lead to earnings declines. Prices for semiconductor chips seem to have leveled out and may soon climb upward, and the market for digital video disk technology is growing, as well. These stocks are not timely in 1999, but several may show modest improvements in the second half of the year.

Growth is expected to be modest for the larger capitalized companies in the food industry during 1999 as raising sales will be difficult. Many companies will divest themselves of underperforming product lines and non-core areas, and acquisitions and consolidation within the industry is expected to continue as well. These stocks are only mediocre selections for investors in 1999, and stocks ranked as the most timely should be favored.

The household products industry is consolidating during the late 1990s so companies can compete abroad and in the US through good strategic fits. Top-line growth, which has flattened, could also be accelerated through acquisistions by larger-capitalized firms, but the industry needs to increase its foreign operations. These stocks are not timely in 1999 and there is little potential growth for the next three to five years for the industry.

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.

Prices and earnings in the medical supplies industry have been under pressure in the late 1990s from government insurance agencies, such as Medicare, and competition within the industry. Reaearch and development, technological innovation, and industry consolidation are some of the methods by which medical supply companies have attempted to cope with the situation. Investors need to consider safety and timeliness factors when evaluating these stocks for selection.

Low interest and unemployment rates, combined with a good stock market and consumer confidence, made 1998 a good sales year for the automobile and truck industry. However, sales are expected to be lower in 1999 due to price competition and deflation as well as slower US economic growth. The industry is also becoming more global with the merger of Daimler-Benz and Chrysler Corp. Investors need to be selective with these stocks in view of the cyclical nature of the industry and current valuations.

The Asian economic crisis and the stronger Japanese yen have had a negative impact on Japanese exports of consumer electronic goods and on semiconductor prices, as well. Sales of digital versatile disk (DVD) technology, however, have been good and the consumer shift to DVD is expected to be beneficial for the industry in the future. However, these stocks are not timely in 1998 and 1999 and investors need to be selective.

Growth prospects in the food industry are limited due to market saturation and the maturity of the industry, but some new trends in US food consumption patterns may help some companies enlarge their markets. One of the new areas of growth is in the low cholesterol, low-fat/non-fat food segment and health foods are now being sold in supermarkets. Several stocks in this industry will outperform the market in 1999, but most are conservative investments.

The household products industry is viewed as defensive by many investors due to mounting international economic problems and uncertainty as to the growth prospects of the US economy. The larger companies in this industry are able to deal with mass merchants on an even-handed basis, but many smaller ones may need to merge or form joint ventures. Investors need to be selective when evaluating opportunities in this industry.

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.

The factors affecting the medical supplies industry's future performance include the development of new technologies and pressure to control healthcare costs. Given those factors, some companies will suffer, but those with cost-effective products will thrive. Healthcare stocks are generally perceived as defensive, but they have proved vulnerable to the market's increased volatility.

Auto industry stock prices, as of Sep 1999, are about 20% below their July highs. Auto stocks therefore present a good long-term buying opportunity. Their total-return potential through 2003 is good. Auto stocks also offer healthy dividend yields to income-oriented investors. US vehicle sales are expected to total 15.16 million in 1998, reflecting low interest rates and decent personal income and consumer confidence levels.

The decline of the Japanese yen is having an effect on Japanese companies, which can be good or ill depending on whether their markets are in the US or Asia, and this is not expected to change for quite some time. Dynamic random access chip prices are also declining, but the replacement of videocassettes by digital video disks is becoming more realistic. These stocks are not timely due to industry downtrends and investors need to be selective.

There has been a lack of interest in household products industry stocks as it is mainly a stable, mature industry in the US and market growth is not likely. However, acquisitions, foreign markets, and product innovation can lead to growth for this sector. Investors need to focus on individual stocks which are timely and participate within current industry trends.

Diagnostic ultrasound imaging is playing a more important role in medical technology and the medical supplies industry, and equipment replacement by hospitals should help revitalize the sector. Asia and Latin America are also emerging as important markets for ultrasound equipment due to its low cost and ability to reduce healthcare expenses. There are good earnings prospects for the industry and investors should seek the more timely stocks.