NYSE analysis

"The stock market has stalled in a range that roughly approximates a 50 percent recovery of the prior bear market," observes Ian McAvity's Deliberations on World Markets newsletter (P.O. Box 40097, Tucson, AZ 85717). "The initial crash rebound should be peaking around now. Program trading on the NYSE has more than doubled its share of total volume in the last five years, with larger traders more dominant. I get nervous that the exits could get badly crowded if they were forced into selling."

Janus Growth and Income Fund has made an average 12.94 percent annually on its investors' money over the past decade by buying and holding stocks with strong balance sheets and the ability to deliver higher earnings and cash flow than Wall Street expects. It also mixes in some bonds for both income and lower volatility. Recent favorite stocks: Berkshire Hathaway, Citigroup, Cisco Systems, ExxonMobil, Microsoft, Tyco International, United Health Group.

China, the growth story of the decade, has boosted the fortunes of shipping companies who are being stretched to the limit trying to get goods to and from the mainland. That's good news for NYSE-listed shipping firms with exposure to Chinese routes, says Magnus Fyhr, Jefferies & Co.'s tanker analyst. "They're all trading at around eight times earnings, are generating good cash flow and facing huge demand." Fyhr's favorite shipping stocks: Frontline, Stelmar, Overseas Shipbuilding Group.

When is a stock buyback a positive sign? "When it involves a mature company that doesn't need money to build its business, a company throwing off lots of cash," says Howard Schilit of the Center for Financial Research and Analysis in Rockville, Md. "It's like a dividend: You'd rather have the company give that money back to the shareholders." Financial services companies with cash-rich balance sheets and few capital expenses often qualify. Merrill Lynch and Lehman Brother each recently announced buybacks.

A Democratic election victory could be bullish for the dollar, says Jeffrey Christian of the commodities research firm CPM Group. "If Kerry comes in and starts running things like the previous Democratic administration, tightening the budget reins, and the deficit comes down, that could be supportive of the dollar and consequently negative for commodities."

Exchange-traded mutual funds (ETFs) have lower expenses than regular mutual funds. But you must pay a brokerage commission to buy them. According to William Bernstein, author of "The Four Pillars of Investing," Vanguard's low-cost index funds have outperformed many ETFs that track the same indexes. Commissions aside, over the past decade, $10,000 invested in the Vanguard 500 Index would have grown to $273 more than the same investment in SPDR Trust ETF. The reason: different strategies for tracking the same index.

Site of the Week: The Web site www.morningstar.com was recently chosen best portfolio management site by the American Association of Individual Investors' Journal (625 N. Michigan Ave., Chicago, IL 60611). It's a full-featured site providing portfolio tracking, market monitoring, stock and fund screening, and research. Much of it is free, with additional features available through the premium service for $12.95 per month.

Investor's Notebook is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.

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