As the New Year rings in, you may be wondering if the ringing of the market bell signals gloom or boom for your investments. To look into the financial future, we asked some leading experts about their strategies for the coming year-and about their great investments of years past.
Stanley Kane, a well-known Sarasota philanthropist, developer and investor, is chairman of the board of the family-owned Kane Miller Corp., a prepared-foods conglomerate.
Great investment: For Kane and his brother, Daniel, who also lives in Sarasota, buying back the family's prepared-foods business, Kane Miller, was their all-time best financial move.
Their parents started the company as J. Kane Grocery, "a tiny little business in food preparation," in 1920. Their sons took over from them, and in 1960, decided to take the company public. By that point the company was a conglomerate that dealt in manufacturing, canning, livestock, dairy and more. "We were doing $3.5 million in volume and had earned $34,000 in four years of work," says Kane. The stock quickly soared, but then slowly declined. By 1984, the company was doing $1 billion in volume, "and then the stock broke," says Kane.
"We decided it was underpriced and we weren't getting the recognition we could, so we decided to buy it back before anyone could buy it out from under us," says Kane. The brothers borrowed significant sums and bought Kane Miller back in 1984. Today, family members own 90 percent of the company. "It was the best investment I ever made because we had a lot of leverage when we made the investment, and we didn't have to answer to anybody."
Strategies for 2006: Forget fears of a real estate bubble, says Kane-Florida property is still a good bet. "People are coming here at a continuing rate," he notes. "If you're careful, there's money to be made in real estate. But don't overpay. Buy cheap and sell high."
Steve Forbes, CEO and editor-in-chief of Forbes magazine, was in town recently to speak at the Wall Street Live investment conference. The one-time presidential hopeful was also happy to share some financial nuggets with our readers.
Great investment: You never forget your first time-or at least Forbes hasn't. "As a youngster I requested that I receive shares of stock as my Christmas presents," he recalls. "The very first stock I chose was Polaroid. This was in the 1960s, and in those days Polaroid was a vibrant growth company. Of course now it's all but disappeared."
A few years later, Forbes' father urged him to sell, but the teen-ager held on to half his shares. The elder Forbes consulted his brokers, editors and friends and reinvested the other half in Penn Central railroad company-which Forbes says had "one of the biggest bankruptcies in history" not long after.
"So I learned that experts aren't always correct," says Forbes-and after that, his father let him do his own stock picking. As for that Polaroid: "I'm proud to say I sold it at its peak, before the company faded, and made a good return."
Strategies for 2006: "Don't be a market timer," he says. "That means don't try to pick when to get in or out of the market, because you'll get whipsawed. A lot of people invest on emotion and sell when it's high and buy when it's low. But we're in a period of great uncertainty; the market has been very sloppy. It's important for people to make committed investments and stay with them until the market gets better, because it always does."
One more tip: "Never take seriously people's tales at cocktail parties of great market success. They're not true."
Mark Hammer, president of Hammer and Company, is a graduate of the Wharton School of Finance. He's been an investment advisor since 1982, and started Hammer and Company in Sarasota in 1992.
Great investment: Hammer made it in 2005 for his oldest client, who wanted to invest in the Internet. "This man was 90 years old and insisted I buy Google-against my advice. I thought it was too risky for him. Usually you want to buy a tech stock for a young person because they have time to wait for it to go up. But he wanted a little spice in his life." The Internet giant was $176 at the end of 2004, and at press time was $353.74 and climbing. What's more, Hammer's brave client "has since increased his position-it is his largest position in his portfolio."
Strategies for 2006: Hammer thinks the energy sector continues to look good. "Oil and gas still see large rises," he says. "Oil right now is $62 to $65 a barrel. But the current earnings we're seeing are based on maybe $45 a barrel. Even if it drops back to $50-that's still more than it was." And with the rise of China and India, worldwide demand continues to increase.
Also looking good to Hammer are delivery companies FedEx and UPS. As people do more business over the Internet, he says, "retail stores are dying on the vine, but things still need to be delivered," especially as they expand into international markets.
And keep an eye on community banks. "There are still going to be a lot of mergers. I prefer [to invest in] the small banks because they're the ones who get taken over by the big guys."
Bruce Crissy, owner of Crissy Galleries in Sarasota, has been in the arts and antiques business since he started helping in his mother's Rochester, N.Y., antique gallery at the age of eight. He has built relationships with collectors for more than 30 years.
Great investment: In 1994, Crissy and his wife bought a painting by Ringling grad Steven Scott Young for $25,000; a gallery recently offered them more than 10 times that amount for it, but they don't intend to sell. "I had seen it in an exhibit in St. Petersburg and was amazed," says Crissy, "so I took my wife to see it, and she fell in love, too. And that's what I tell people: Buy what you love." He adds that "the wonderful thing" about investing in art is you also "get the joy of ownership. I get to walk by it every day and experience it all over again."
Strategies for 2006: Southwest Florida's real estate boom bodes well for contemporary Florida art, says Crissy. "There's this tremendous influx of people, and they want to be involved in the community and participate in its culture." That means snapping up local paintings and objets d'art-and not necessarily antiques. "There's not a lot of good Florida art from before the 1950s or from the 19th century," Crissy notes. "So people are focusing on the art produced since then."
Christine Jennings, former president and CEO of Sarasota Bank and a prominent local Democrat, is in the midst of her second run for Congress.
Great investment: Of course it was her Sarasota Bank stock, says Jennings. In 1992, she borrowed $75,000 to start the bank, for which she was president, CEO, director and chairman of the board; she made $3 million when the bank was purchased by Colonial Bank two years ago.
Strategies for 2006: Jennings still believes "bank stocks are great investments." Not only is banking one of the most highly regulated industries, but when you invest in a community bank, "you can walk right in and talk to the people and see how it's going. You can keep a close eye on your investment." And she recommends that this year, you give children or grandchildren savings bonds for birthdays and holidays. "Let that money start their college funds. They're easy to get, they make great gifts, and they sit there and build interest."
Gary Wood, president and chief investment officer of Wood Asset Management, ran his investment management business in New York for 10 years before moving it to Sarasota 12 years ago. He is a specialist in macro factors that influence the stock market.
Great investment: Wood purchased stock in Petsmart in 2001, even though the pet-supply company had plummeted from $12 to $3 in 2000. "People thought it was a real dog of a stock to buy-no pun intended," says Wood. But the company had high cash per share and significant earning power, so Wood bought it at $3.50. At the end of 2004, it sold for $30.
"I found out about the company because someone gave me a dove," he explains. He went to Petsmart to investigate cages and feed and "started looking around and got to know the store. And now I can afford to feed the bird really expensive food because I made a good investment."
Strategies for 2006: His buzzwords for 2006, besides "baby boomer," are caution and stability. Wood expects interest rates to rise, because inflation numbers have been deceptive. "Inflation rates drive interest rates," he says, and inflation is currently being underreported because home and energy expenses have been eliminated from that index.
"Federal Reserve Chairman Alan Greenspan always went too far," Wood says. "When he went low, he went too low for too long. So he might go to the other side next year." And Greenspan's likely successor, Ben Bernanke, is expected to continue that trend.
Other advice: "Be a long-term investor. Tax rates on long-term capital gains have gone down to about 15 percent from 35 percent since George W. Bush passed his tax-cut package. You get to keep more money."
Dick Vitale, who is entering his 27th year as ESPN's high-energy college basketball announcer, does most of his work from his 12,000-square-foot home in Lakewood Ranch.
Great investment: That Lakewood Ranch home. "My home was the best decision I ever made. My heart is there, and I just love it," says Vitale. "I struck gold."
He spends most of his time in the home's office and 1,200-square-foot cinema-style theater, which has eight leather chairs, a 135-inch screen, and doubles as the production studio for his ESPN broadcasts. "It's a combination of luck and a lot of hard work, and I've been very lucky. I only wish my parents were around to see me today, because they would go wild."
Strategy for 2006: "I learned from my mom and dad, who were not rich and not educated, that you always find a way to put something away, even a little bit, every week," says Vitale. "You always want to be in a position where panic doesn't set in. You want to have a nest egg as you get older."
He urges everyone to "start saving now, even if it's only $5 or $10 or $20 a week. Let me tell you something I'm very proud of. I'm 66 now and I act about 12, but I've never been in a situation where I didn't have a check coming in."
Also important, he adds, is getting good advice: "I have a tax lawyer, an accountant, and an advisor with my investment group, Merrill Lynch." And when it comes to putting money into the stock market, says Vitale, stay where you're comfortable. "At my age, I need less risk. When you're young you can do that, but I'm at a point where I would rather take a smaller return than make a big investment that I'm not sure about. I'm not trying to hit the grand slam."
Robert Stovall, global market expert and Sarasota resident, is a professor of finance at New York University's graduate school of business; a regular contributor to Forbes, Financial World and Sales & Marketing Management magazines; a commentator on CNN, CNBC, Bloomberg and Reuters; and was a regular panelist on PBS's Wall $treet Week with Louis Rukeyser.
Great investment: Although Stovall is an expert in the financial markets, one of his biggest hits came in real estate. In 1962, he bought a beach house (at his wife's behest) on Long Beach Island, off the south coast of New Jersey. Long Beach is "a skinny strip of sand, similar to Longboat Key, with beaches on both sides," he says. "But it had been ravaged by a terrible storm that year, and so people were afraid about buying the land or building anything. I bought a lot and built a house on stilts, and my total cost was around $60,000. I sold it in 1982 for about $300,000. That was a very good return, and someone told me recently it's now worth almost $2 million." Still, he says, his philosophy is that "real estate should be something you enjoy and use and don't expect to make a profit; and if you do, thank God."
Strategies for 2006: "There's something magical about getting 5 percent on a government bond," says Stovall, who expects exactly that to happen in 2006. "Normally, the Fed writes the market letter. But in the last year, we've seen that oil was writing the market letter. The word for interest in Danish and in many languages means 'rent'-it's the cost of renting money. What Greenspan has done to interest rates has made it easier to pay the rent."
He predicts we may see money coming out of stocks and going into bonds-"because that's a guaranteed rate." And money may come out of real estate as well, since the cost of carrying real estate rises with interest rates.