March 03--If the stock market takes a dive, Two Rivers money manager George V. Reis will be prepared.
The Standard & Poor's 500 index is flirting with 1,500 and trading at multiyear highs. That has some analysts worrying about a pullback and has paralyzed some investors.
Buy, hold, sell? Reis said he has found a way to take the emotion out of decisions about the investments he makes in good, solid companies.
Reis, president of GVR Investment Management Inc., purchases one-half to one-third of a company's shares and submits a buy order at a lower price for the remainder.
"Even if the company itself is doing well, in a 5% or 10% correction, its price will also go down. So with this strategy we would end up buying the rest of the shares at a discount," Reis said.
Once he owns the shares, Reis often puts what's called a trailing stop loss on them. A trailing stop loss is set at a percentage level below the current price and adjusts as the share price fluctuates. If a stock is trading at $100 a share and an investor sets a trailing stop loss at 10%, he would automatically sell at $90. If the stock price rose to $200, the automatic selling price would rise to $180.
"What I'm trying to do is take out the market timing and put in the idea of addressing the quality of the companies," Reis said. "This is almost like insurance."
He would use these strategies on all three of these quality companies, which come recommended by Wall Street analysts. The biggest risk for them is the possibility of an economic downturn, Reis said. But they all have potential to provide returns of 10% a year over the next three years, he said.
Manitowoc Co. (MTW, $18.14), makes and sells crawler cranes, telescopic cranes and other cranes and related products, as well as food service equipment worldwide.
The company has an impressive board of directors and leads the market in both of its businesses, Reis said.
This stock is more aggressive than the others because of the added risk of the cyclical and highly competitive nature of its industry, he said.
It has traded in a 52-week range of $9.60 to $19.90. Manitowoc shares could reach at least $22 in the next 12 months, Reis said.
American Express Co. (AXP, $62.37), New York, provides charge and credit payment card products and travel-related services to customers worldwide. The company has announced it is getting out of the travel business to focus on its niche of being the premier, elite credit card, Reis said.
American Express shares have traded in a 52-week range of $51.54 to $63. They could reach at least $70 in the next 12 months, he said.
Costco Wholesale Corp. (COST, $101.42), Issaquah, Wash., operates membership warehouses that sell branded and private-label products in a range of merchandise categories.
The company is rigid about the price points and the type and quality of the products in its stores, and has a maximum markup of 15%, Reis said.
"It's a well-run, disciplined company with a very successful strategy," he said.
Costco has only about 600 stores, so there is room for growth. The company generates a good portion of its income through American Express memberships because customers may only pay with those credit cards or cash, Reis said.
Costco shares have traded in a 52-week range of $81.98 to $105.97. They could reach at least $110 in the next 12 months, Reis said.
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