Copyright © 2020
Contrarian stock analyst predicts major market slip
Benj Gallander, author of The Uncommon
Investor, says stocks will plunge by New Year's
Gallander knows his readers are getting antsy.
They're anxious for hot tips, but he's stubbornly staying on the sidelines,
waiting for what he sees as an inevitable downturn to get back into
Sometime before year-end, the self-described contrarian, co-publisher
of the Contra The Heard newsletter and author of financial guide
called The Uncommon Investor, thinks stocks will tumble in a
major way. And that's when he plans to start beefing up his portfolio.
"Last year, we bought the least amount that we have in 10 years
and so far this year, we've bought even less," said Gallander,
who is in Vancouver on his annual visit from Toronto. "We've cut
back incredibly. We're not telling people to sell all their stocks and
get out of the market, but we are urging them to selectively and aggressively
The markets have been choppy because of lingering Y2K concerns, Gallander
argued. Investors are uncertain so they react to every bit of news that
comes out, he said, including things that would generally slide by at
That nervousness and the attendant volatility are only going to increase
as year-end approaches, he said.
As well, the last quarter is likely to see some slowdown for the high-flying
tech companies that have been underpinning much of the market's bull
run. As Y2K-related spending drops off, so will revenue and earnings
for a lot of high-priced market leaders.
Gallander agrees that other projects that have been put on the backburner
as the millennium looms may now reappear on corporate agendas. But he
thinks that while they will make up for some lost Y2K spending, the
momentum won't be the same.
Moreover, he warned that such delayed projects will take time to come
Add in a lot of "insane valuations," rising oil prices, and
concern about higher interest rates, and Gallander sees every reason
to be bearish in the short-term.
"We are far more into cash than we've ever been and it's not because
we're turning conservative," says Gallander, who puts out Contra
The Heard with Seattle-based partner Ben Stadelmann. "We're
sitting back and patiently waiting for opportunities that will develop.
We've got about 100 companies on our stockwatch list, but we're biding
in a lot of "insane valuations," rising oil prices,
and concern about higher interest rates, and Gallander sees every reason
to be bearish in the short-term.
and Stadelmann recommend only stocks that they own in their personal
portfolio. The pair, who favour solid companies that they think have
been beaten up and undervalued, have cut their holdings in the year
to date to 24 issues from 31.
Several issues were eliminated because of mergers -- including Royal
Lepage Ltd., Noma Industries Ltd., Unihost Corp., and Cambridge Shopping
Another two, Intertan Inc. which owns Radio Shack, and Navistar International
Corp., were unloaded because Gallander figured they'd reached their
A mere trio of companies has passed muster so far in 1999.
said he likes Fleming Inc., a U.S. food distributor and grocery store
operator because it has brought in a new chief executive -- a
Walmart Alumni -- and is on the way to a turnaround.
The company has had some struggles, but its sales remain at the $15 billion
level. As well, there is considerable consolidation ongoing in the
grocery industry, which could make it a potential takeover candidate.
Moreover, whatever else happends in the economy, food wholesalers
and retailers are in the "necessary field," Gallander said.
"Everybody has to eat."
He bought the stock at $7.625 US and he thinks it can hit $32.50,
at which point he'll sell. Meanwhile, he's still recommending it as
Resources Inc., a Toronto-based copper and zinc producer, is also
on the buy list thanks to the improving outlook for commodities, the
company's $50 million in cash, its experienced management and its
lack of long-term debt.
"It can hang on for quite awhile," said Gallander, who bought
Aur at $1.91 and is now ranking it as a "hold."
Corp., acquired at 62.5 cents US, is considered a highly speculative
bet. Gallander said he decided "to take a flyer" because
he likes the US apparel company's turnaround potential.
The whole sector has been hit and many competitors
have already hit the skids. "The question is whether Tultex can
stay around long enough to rebound," said Gallander. "We
like to think they can, but they can just as esily go bankrupt in
Notice: Copyright © 1998 Barbara Aarsteinsen Reproduction of this article
in whole or in part is prohibited without permission of the author.