Analysts see recession as buying opportunity

NEW YORK -- Though a mild recession might be underway, now could be the time to buy stocks, said members of a investment conference discussion panel Thursday.

Current prices make many stocks attractive now, said the more optimistic panelists on "2001 Investment Climate: Seeking Growth in a time of Revaluation" at the Needham & Co. Growth Conference in New York City's Palace Hotel.

Panel host Mario Gabelli proclaimed that a "love-in" of deal-making would be a major growth catalyst in 2001.

"A year ago I couldn't find any stocks to buy. Now I feel like a kid in a candy store. No matter what happens there are some truly unusual values here, said Peter J.R. Trapp of the Needham Growth Fund (Nasdaq: NEEGX).

Trapp named Advanced Micro Devices (NYSE: AMD), Merix (Nasdaq: MERX) and Park Electrochemicals (NYSE: PKE) as 3 stocks he said "you can safely hold for a year or two and feel good about returns."

"Companies are selling at a 75 percent discount, this is a good time to buy," said James Hillary of Masico Capital in his speech on why "the glass might be half full."

"Yahoo (Nasdaq: YHOO) said boohoo, and I say 'Who cares?' " said Hillary, who likes companies that have special niche products and patented technologies, or leaders like GE and WalMart. "Tech as a whole grew before Yahoo, and will grow after Yahoo."

But economist Edward Hyman said it might be too soon to jump back into the market.

"The darkest hour will be before the dawn -- some time in the spring or summer," said Hyman, chairman of International Strategy & Investments Group, who was recently named the top forecaster in The Wall Street Journal's semiannual survey of economists.

Hyman said the glass still looks half empty to him, and no one seems to be noticing.

"About the only guy out there that's panicked is Greenspan," he said; "It strikes me that we are still, as a group, too hopeful, believing that this is a passing storm."

Even in 1988, when things were looking slightly iffy, people were buying into bonds and selling stocks, Hyman observed. But now, "the bond guys are still cautious... and the equity guys are as the most bullish they're ever been."

The economist gave three reasons on why a recession is undoubtedly underway: the rise in oil prices from $12 to $30 a barrel, the reversal of tech growth, and recent soft data from the government.

"We've never had oil go up this much without having a recession," Hyman said, emphasizing that this is a global phenomenon, not just some localized energy crisis.

Measures of industrial production now indicate the technology chunk of production is down about 30 percent after being up 57 percent last year, "There has been a big reversal of tech activity on a global basis," Hyman said, adding that 2001 will be a rough year for growth on the industrial side, regardless of what stocks do.

Hyman has observed that government data has been even softer than expected in past weeks, particularly with government unemployment claims.

Friday's economic data lent further support to Hyman's theory; though December retail sales rose 0.1 percent versus expectations for a 0.4 percent decline, retail sales excluding autos were flat compared to the expected 0.1 percent increase. The producer price index was also flat in December compared to the expected 0.1 percent increase and rose by 0.3 percent excluding the food and energy components, higher than the expected 0.1 percent rise.

The mood at Bush's recent meeting with economic and business luminaries in Arizona was also grim, with people predicting that the pattern of lay-offs would pick up speed over the next 6 months, according to Hyman.

"The feeling is that nothing like this has happened since ྆," he said.