INVESTING: As bull market winds down, time remains for bargains

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There wasn’t enough space last week to complete the discussion of the long-base theme. These are stocks that have been trading in tight ranges for many years and can offer tremendous returns to investors.

Last week, I brought up Honda and Franklin Resources. Here are a few more that have been moving sideways for years:

Energy company Smith International Inc. traded as high as $44 a share at the end of 1997, then pulled into a tight sixyear trading range. The stock broke out at the beginning of 2004 and has been moving quietly higher ever since. It is at $61 today, and the stock has a measurable potential to trade as high as $74 within a year. This is a great stock to look to buy on any weakness.

Another company is still $25 away from its all-time high, but it still broke out of a five-year base in December. Dupont had a strong run in the last secular bull market, then topped in the middle of 1998. The stock fell to $35 in 2001 and it stayed in a range of up to $49 until a few months ago.

Dupont is a perfect example of an underloved stock. World economies are still growing, and I haven’t heard of many new entrants into the chemicals field for a long time.

The next two ideas are going to surprise people, but that’s what the stock market does best.

Microsoft Corp. bottomed in early 2001 and essentially has been doing nothing since. The attractive part of the chart comes from the fact that the range has been getting tighter and, if the stock falls below $22 anytime soon, it is probably back to the drawing board. Microsoft is at $24 now, so the risks are easily quantifiable. My gut tells me that “Softee” is not in a hurry to fall a bunch, but the upside may continue to be elusive for a few more years.

Another technology stock that looks like a long, skinny tail is Dell Inc. Like Microsoft, the stock bottomed in early 2001, which is worth mentioning because the majority of stocks bottomed between October 2002 and March 2003. The funny thing about Dell is that the stock looks like it already broke out. There was a big move in November 2004, and although the stock is pulling back to test that support, it hasn’t broken down yet. Chances are, Dell will successfully test the $37 area soon, then get back to new highs.

Keep in mind, though, that technology stocks in general are in a funk right now, and there is a decent probability that the NASDAQ market topped in December.

Catching up to the here and now brings us closer to the end of the correction that started a month ago. There are some early signs that a short-term bottom is forming, and I don’t expect waves of selling to pick up from here. The key to surviving the rest of this bull market, which should last another nine to 12 months, is being selective. The best days of the bull market are behind us, so more scrutiny and caution will pay off from here on out.

Hauke is a local money manager. His column appears weekly. Views expressed here are the writer’s. Hauke can be reached at 566-2162 or at

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