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Show 77 _BUSINESS Wednesday April 7 1999 TheSalt Lake Tribune CENTERPIECE Urn BRIEFS Can Top 20 Companies Continue Their Dominance? Wal-MartIs Recalling OzarkTrail Lighters KNIGHT-RIDDER NEWS SERVICE WASHINGTON — Wal-Mart StoresInc. is recalling about 1 mil- Faster than their toughest competitors. Moreprofitable than the rest of the Standard & Poor's 500. Able to leap from countryto fuel cylinders that can allow bu- but prominent group of investment experts Jion Ozark Trail butane utility lighters because somehad cracked tane to leak andignite. The Consumer Product Safety Commission said Monday that the 11-inch-longlighters, which have a black plastic handle and a red trigger, can continue to burn after the trigger is released. The lighters sometimesflare or producean un- steady flame, according to the CPSC. Wal-Mart, Bentonville, Ark., has received two reports of these lighters leaking fuel, whichignited and singed the user’s facial and armhair. There have been nore- ports ofserious injuries or property damage. Thelighters have model number HH-133 written on the packaging ‘Theywere soldin Wal-Martstores pationwide from August 1997 through March 1999 for $2. can stock marketto evenloftier heights The thinking of these experts defies the con. ventional wisdom that the stock market generally is overvalued andthat the biggest companies are the most overvaluedofall Instead, these experts say, big companies such as Microsoft, Intel, Pfizer, Wal-Mart and Coca-Cola constitute a sort of corporate superclass. Microsoft, Intel and these companiesthat areselling for 40, 50 and 60 times earnings — they’re worth it,” said JeremySiegel, finance professor at the University of Pennsylvan Wharton School andauthor of Stocks for the Long Run In reaching this conclusion, Sieg paredthe 20 largest companiesin a‘ today with the 20 largest in 1964, a sen because the economy was similar to to- day's — with lowinflation, lowinterest rates and a strong stock market. He focused on the 20 largest — measured by market capital- coli-contaminated notother states maybe involved as well,” said Tom Skinner, a spokes- man for the federal Centers for Disease Control and Prevention in Atlanta. ‘The outbreak has beenlinked to meat recalled from Rochester Meats Inc. in Rochester, Minn., the Agriculture Department said Mon- day. Beth Gaston, spokeswoman for the food safety and inspection office, said scientists found “'genetic fingerprints” linkinga strain of E. coli “in samples of the meat from Rochester Meats to the pasie in Maine who have become il.” On USDA orders, Rochester Meats Ine., of Rochester, Minn., which supplies meat for restau- rants and institutions, recalled 170,780 pounds of product last week. ‘That's the equivalent of one day's production The top 20 companies today have average five-year earnings growth rates of 23.1 per- companies in 1964, Siegel said. That means today’s top 20 are more profitable than their predecessors — and worth moreto investors who, in theory, base the price they pay for a stock on the value of its future earnings and dividends. There is also reason to believe that the top 20 will continue their dominance, Siegel said Theyare projected to increase their earnings 17.2 percent on average over the next five years, compared with only7.2 percentfor the entire S&P 500. ‘The top 20 are beating their smaller peers now and their predecessors in the earnings racefor three reasons, Siegel said First, their size makes them the first name that consumers think of when looking to buy a particular product. People seeking networkingsolutionsturn toCiscofirst, for example. Second, theysell around the world. Thirtyfive years ago, companies earned most of their revenue in the United States. And third, they profit from being in rela- tively young industries — telecommunications, pharmaceuticals, computers — that havehigher earnings potential than more mature businesses such as building cars. That dominance explains why Microsoft the biggest companyin the S&P 500, can sell for 74 times earnings, why No. 2 General Elec- ting its latest gadget in the hands Of a nude womanis drawing not merely glances, but also scorn. The company is being castigatedin feminist forums, peppered by telephone complaints and shunned by Santa Clara County's transportation agency, whichre- fused to put the provocative im ages on its bus shelters “The photograph of an un ganizations. triccansell for 40times earnings a 20 Bristol-Myers cansell for 41 times arn Most experts, however, consider these ratios stratosphericbecausestocks have sported averageprice-to-earnings ratios of 14.4 since 1872 issue is how sustainable are those prices, particularly in a low-growth environ ment.” said Matthew Brown, whooversees eq- uitytrading for Wilmington Trust. “We would not alone. Ralph Acampora, chief technical strategist for Prudential Securities, has been making the same casefor much of the 1990s — andthe recent run-upin stockpriceshasonly made him morebullish on owning the big names. It seems that wekeeplooking to the same few nam is we makethe drive toward Dow 10,000,” Acamporatold clients March 22 in Prudential’s weekly advisory letter. “While weagree that market leadershipis narrow, it is important to keep your eye onthe ball in termsofsticking with the areas of strength Such prognostications worry the campthat believes recent stock-market history will be repeated John Campbell, an economics professor at Harvard, and Robert Shiller, an economics professor at Yale, havedone research showing that the S&P 500 could be worth a third less than it is todayif price-to-earnings ratios re- turn to traditional levels over 10 years. The value of the S&P 500 index is weighted ac- In the past, whenit’s beenat the upper end of the range, the stock market tendstofall Shiller said Siegel's thesis depends entirelyontheaccuracy of analysts’ earnings forecasts, which tend to be overly optimistic, Campbell and Shiller said Jeremy [Siegel] raises an interesting point and it might be right, but it’s not persuasive either,” said Shiller, who has done research “Claimingthat the presenttimeis unique may require more careful research thanhe’s presentedso far. Statisticians look- theattention of people who have California-Los Angeles, who stud. boards and dozens of bus shelters they are marketing it as styleor 3Comis sucha great company ody of four salacious photographs of women holding the new PalmV andcalled his rendition “Simply Porn.” He posted the mock ads readily recognize the functional need,” says HowardBesser, an as- sociateprofessor at University of front, her face hidden, but clutch ing thedevice. son Kottke, 25, a Minneapolis Webdesigner with his own Web page. Last week, he posteda par- not bought a hand-held personal talposition is on 20 Bay Areabill in San Francisco. Other photo graphs show her nude back and But the Simply Palmads cried out to be parodied, at least to Ja organizer. “They'vealready saturated the market of people who clothed womancurledupina fe slithering “Now next to a copy of 3Com’s ad, which he reproduced without permis. image, the same way you sell a The company advised him to ies technology advertising. take down the ad. The company argues the ads are tasteful. He complied His fans, however, have copied the parody ontheir own pages. “If you wantedto be Howdid something this insensi tive slip through?” asks Peggy Taylor, senior vice president of PeopleSoft, a Pleasanton soft ware company. “It doesn't have Buying or Refinancing? Control Of Your Loan $ave Thossans Dare To Compare! ake anything to do withtheir product 5.875% sama Peopleare making fun of them Thead campaign is part of San ta Clara-based 3Com’s plan to bring the Palm V, a hand-held personal organizer coveted by the techno-savvy, into the main 6.125% Stream. Theads depart fromtech nology companies’ usual focus on bits, bytes and bauds anddrawin stead onsex appeal Observers are having a hard time connecting the 3Com image with the message. 1 don't know if they are selling thesizzleor the steak,” says Lau ra Breeden, a Menlo Park tech nology consultant to nonprofit or 000 ENDING www.lendingonlin ne net aren't theonly forcedriving these though. With million baby Microsoft accounts for 4 percent of thetotal market value of the S&P 500, so 4 cents of every dollar invested in [an S&P 500 fund] goes to Microsoft,” Turner said. Microsoft, MCI Worldcom, Merck and the other companies among the S&P500’s 20 larg- est are simply than the economy. General Motors, for example, was in a matureindustry A few companies in today’s top 20 are in relatively tame industries — Coca-Cola, for example — but manyarepioneers trips. Today it is opennot only to university employees, faculty and students but all Salt Lake County residents. “The newtop 20aregrowingat twoto three timestherate of the entire economy,” Siegel _o‘3D Digital Inc. of Salt Lake has completedits acquisition rata Inc., a St. George computer-graphics software company. C3Doperates atelevision network that offers three-dimensional programming to satellite-dish owners and cable-television subscribers. ‘Terms of the acquisition werenot disclosed. said. “There have been new developments in technologies and breakthroughswherethere’s Beiensions potential for profit in the United s and aroundthe world iegel even says thereis historical prece- Crities of the high valuations of large com: panies often point to the Nifty Fifty, a group of stocks that attainedlofty heights in theearly 1970s, only to crash and burnand, in some cases, never achieveprices that high again. Siegel, however, traced the returns of these companies — including Coca-Cola, Disney and General Electric — and determined that an investor who bought them at their peak in 1972 and held them through August 1998 would have earned almost the samerate of return as an investor who ownedthe entire S&P 500index. Over that period, the S&P re- turned about 12.7 percent yearly, compared with 12.5 percent for the Nifty Fifty. Gentner Communications Corp. of West Valley City has partnered with Logical Transitions of Tempe, Ariz.. to offer education and training for users of videoconferencing equipment. Gentner pro- vides video- andtele-conferencing products. Donald J. Winder, president of thelaw firm of Winder & Haslam in Salt Lake City, has beenacceptedas a charter memberof the International Society of Primerus LawFirms. Primerus is a nonprofit, national network of small- and medium-size law firms. Lawfirms apply to the network, which has 100 members. 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It’s just that people have misinterpretedthehistory, he said would haveto fall for the overall index to do the same. theads. By displaying a nude woman Palm Computing hopesto attract undeniably attractive so the 20 largest stocks exert a powerful influ- ence. Theprices of manyof those companies says David Hunter, of Foote, Cone & Belding the advertisin; mthat created thority declined to put them on bus shelters. own somesmall and medium-size companies. but saysthe profit potential makesthebiggest dent for the high valuations of today’s big with Siegel. name change Inc. Large Cap Fund — up45 percent in 1998 — to capitalizeonthegainsofferedbythese| stocks. Turner still recommendsthat investors cording to thesize of the companies in them, images in car ads, across the hoods Santa Clara Valley Transportation Au- Turner Viewpoint Digital Inc. is the new name for Viewpoint Deis International Inca computer-an mation company in Orem. The Twoyears ago, Turner created its Turner ings, Siegel and others say sexist, you'd haveher like those “But it’s offensive. No sooner were the ads ready than they hit a roadblock. ‘They competeacross the world ma Ads For Gadget Drawing More Than Looks K DDER NEWS SERVICE Networking giant 3Com Corp.'s attempt to grab attention by put manager TurnerInvestment Partners, agrees with Siegel that the biggest companies have immenseearnings power. Financeprofessor The ing over the numberswill always find some thing unique about thepresent Robert Turner, co-head of Berwyn money said. Jeremy Siegel suggest that over a muchlonger period of time, it can’t be done Siegel's thinking isn't conventional, but heis cent, compared with 8 percentfor the top 20 “We're looking into whether or they're worth it. They're SuperCorporations — and a small WASHINGTON — Authorities areinvestigating an outbreak of ill- ness from E. 50 and60 times earnings — thinks these companieswill propel the Ameri- E. Coli-Tainted Beef Sickens Resort Guests becameill at a Maineski resort. “Microsoft, Intel and these companiesthat areselling for 40, country in a single bound ization,the total value of outstanding stock — because they havethe greatest effect on the overall value of the S&P index. ground beefafter at leastsix guests ay someexperts Corporations such as Wal-Mart and Coca-Cola constitute a sort of corporate superclas = Dae P ee oats i) Services 740 East 3900 South, Ste, 130 Salt LakeCity, UT Itc LOWESTPRICES ON ALL MODELS eT ATTTame ATORCOs i National, Starkey, rely; | |