A market-letter writer who's fallible -- and canny
Fort Lauderdale, Fla.
Last year Stan Weinstein visited the floor of the New York Stock Exchange. Much to his surprise and pleasure, when introduced to the floor traders and specialists many of them pulled out copies of his newsletter, The Pro fessional Tape Reader.
The newsletter, begun in 1972, has developed a considerable following among investment professionals. According to Mr. Weinstein, who is headquartered in nearby Hollywood, Fla., he has an even mix among subscribers of individuals, institutions, and professionals, such as stockbrokers and exchange floor traders.
By way of comparison, Joseph Granville, who sends out the Granville Market Letter, has more individual investors as clients. (It was a sell recommendation by Mr. Granville that caused the stock market to plummet the week before last.) Mr. Granville has 11,000 readers paying $250 a year, while Mr. Weinstein has 9, 000 subscribers, paying $175 a year.
The two men differ in more than this respect, however. Mr. Weinstein, unlike Mr. Granville, does not claim to be infallible. "I am sure I will probably make another mistake," he said in an interview, adding, "The key is that I am not stubborn. I correct it and get back into gear."
So far, Mr. Weinstein has kept his mistakes to a minimum -- which helps to explain his large following. (He believes his newsletter is the second largest of its kind in the country.)
He has picked the tops and bottoms in 1969, 1973-74, the 1975-76. In 1978, he expected the Dow to go down, but only to 840. As it turned out, it dropped to 740. (Once it fell below 840, he predicted it would turn at 740, and it did.)
His twice-monthly letter analyzes the stock market on a general basis and notes the strong groups and the best companies within those groups. So far, he says, he has picked the right stocks, noting that since July his pa- per portfolio of stocks is up 20 percent, compared with 1 percent for Mr. Granville's stock picks.
"It's important when the market is segmented," be explains, "to be in the right stocks. You could have bought General Motors this year and missed the move the oils made."
Right now, Mr. Weinstein is convinced the market is still in a long-term bull phase. "I'm not part of the doom-and-gloom crowd," he says.
One of the reasons he is positive is the high number of market services that are bearish. At the beginning of the year, he notes, some 45 percent of the market advisory services were negative. At the same time, a large number of odd-lot traders (those buying and selling in less than 100-share amounts) have been selling stocks short. (Stocks are sold short when investors think they are going down. A short sale entails the sale of borrowed stock with the expectation of buying it back and returning it to its owner at a lower price.)
"There could be a big short squeeze if the Dow goes over 1,000," Mr. Weinstein says, adding, "I'm not saying this is going to happen, but it could happen."
The industries he likes just now include the aerospace and defense group, banks, cable television, drugs, nursing homes, and restaurants.
In aerospace he recommends Avco and Fairchild; among banks, Landmark and Flagship (both in Florida); he thinks the cable stocks are overpriced; in drugs, he likes Syntex and Merck on market pullbacks; and among restaurants he is very bullish on Jerrico Inc. and Shoney's Inc.
He looks at the market and the individual stocks strictly on a technical basis.
"I don't look at cash flow, or the fundamentals," he says, "just the supply and demand. I believe that only one-third of the market dynamics is fundamental , while two- thirds is psychological." Every night he looks at the charts (price movements) of some 300 companies he follows. His staff of five keeps the charts updated.
For the past two years, Mr. Weinstein has been in Florida's Hollywood. Before that he was on Long Island. He moved to Florida so he could play tennis 12 months of the year. He also found that being away from Wall Street helped him sort through the rumors and moods that often shift through the concrete canyons.
After withdrawing his "buy" recommendation on Flagship Banks Inc., based in Miami, James Carter, a vice-president at Merrill Lynch, pierce, Fenner & Smith Inc., has "reinstated" his positive position on the company.
In a research report sent to clients late last month, Mr. Carter noted that the dynamics surrounding the bank had changed recently. Flagship has completed the acquisition of Florida Bankshares Inc., giving the bank a toehold into the fast-growing Broward County (Fort Lauderdale) market.
In addition, Mr. carter says, the company has fully recovered from the slowdown in the Florida economy in 1975-76. Loan losses have beem almost completely written off its books, and the bank "has returned its profitability to a healthy level."
For 1980, Mr. Carter is estimating the bank will earn $2.95 a share, up from share.
The analyst notes that the bank's earnings momentum is beginning to slow, because of the competitive cost of interest-paying checking (NOW) accounts and the cost of its aggressive expansion. Furthermore, he says, the high level of interest rates "will probably restrain activity in Florida's important housing market for at least part of next year." Over the longer term, he says he believes the bank is "well positioned" to benefit from the anticipated growth in Florida."
The stock market tried to recover last week from the infamous "Granville slide." But a small gain was the best it could manage. For the week, the Dow Jones industrial average closed at 973.30, up 4.61 points. Volume shrank. Hopes that interest rates had peaked and would begin backing off influenced some buyers. Oil stocks were the strongest performers.