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Personal Finance > Investing
Wall St. looks to the open
September 13, 2001: 3:52 p.m. ET

Money managers are eyeing stocks they may buy when trading resumes
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NEW YORK (CNNfn) - Boeing or Qualcomm? Cisco or GE? Money managers still reeling from terrorist attacks on U.S. territory are eyeing stocks they may start buying when trading resumes Monday.

They said the longer the exchanges remain closed, the easier it will be for Wall Street to rebound. Despite the horrific tragedy, professional investors are thinking about the inevitable return to work.

"Giving people time to recoup would be beneficial to the market," said Phil Orlando, chief investment officer at Value Line Investments in New York.

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The New York Stock Exchange was shuttered Thursday for a third day following Tuesday's attacks that destroyed the World Trade Center in the heart of the financial district. The exchange will reopen Monday following the longest suspension of trading since World War I.

Investing professionals this week said they've been forced to come up with several different strategies to jump back into the market, depending on when the exchanges reopen.

They said an early resumption of trading could have caused a lot more volatility and downward pressure. The delay until Monday will help calm fears and could even help stocks open flat or slightly higher.

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They emphasized that their game plan is just that – a rough idea of what they may do – and that the situation could change dramatically by the time the opening bell rings.

"A delay allows people to have less psychology and more orderly behavior," said Donald Yacktman, manager of the $80 million Yacktman Fund.

Yacktman said he'll be on the lookout for well-priced defensive stocks that are resilient to recession and other crises like the top holdings in his fund, including Dentsply International (XRAY: unchanged at $47.15, Research, Estimates), a maker of false teeth and dental floss.

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Yacktman may also be buying: Department 56 (DFS: unchanged at $9.46, Research, Estimates), a manufacturer of collectibles that has rights to produce some Harry Potter items; Lancaster Colony (LANC: unchanged at $32.05, Research, Estimates), which produces specialty foods, glass and candles; and tobacco company Philip Morris (MO: unchanged at $48.15, Research, Estimates).

"If we get good prices on the businesses we like, I'm willing to buy," Yacktman said.

Yacktman, a longtime owner of Philip Morris, said people aren't going to be changing their habits. He also will be watching top holdings Clorox (CLX: unchanged at $39.28, Research, Estimates) and H&R Block (HRB: unchanged at $36.90, Research, Estimates).

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"No company is totally immune from disaster, chaos, recession, you name it," Yacktman said. "But on a scale, ours tend to be most recession-proof."

Richard Cripps, chief market strategist at Legg Mason in Baltimore, said this is a good time for money managers to be fully invested.

"We have to worship the Holy Grail of open markets," Cripps said.

If the price is right, Cripps said Legg Mason managers may consider buying  financial stocks like Fannie Mae (FNM: unchanged at $75.45, Research, Estimates) and managed-care companies such as Tenet Healthcare (THC: unchanged at $56.77, Research, Estimates). Telecom stocks like Verizon Communications (VZ: unchanged at $50.70, Research, Estimates) and electric utilities like Exelon Corp. (EXC: unchanged at $55.27, Research, Estimates) are also possibilities.

"We're not radically changing what we think is good or bad based on (Tuesday's terrorist acts); we're just recognizing the psychology is radically different because of this," Cripps said.

Orlando, of Value Line, said he will be looking at defense stocks like Boeing (BA: unchanged at $43.46, Research, Estimates), United Technologies (UTX: unchanged at $66.20, Research, Estimates)  and General Electric (GE: unchanged at $39.35, Research, Estimates), as well as energy stocks like BJ Services (BJS: unchanged at $23.37, Research, Estimates), Mitchell Energy (MND: unchanged at $55.55, Research, Estimates), Apache (APA: unchanged at $48.11, Research, Estimates), and Anadarko.

Given the disruption in phone service in the Northeast, he might also look at wireless company Qualcomm (QCOM: unchanged at $50.54, Research, Estimates), Orlando said.

"This is a fluid situation that changes minute by minute," Orlando said.

Wall Street after a tragedy

Looking ahead to the market open will obviously be a painful one for money managers. But history has shown that buying and selling goes on after acts of terrorism, war and other financial crises.

For example, Robert Rodriguez, manager of FPA New Income Fund and FPA Capital Fund, whose career on Wall Street spans about 30 years, was buying shares of Quick & Reilly on Black Monday, when the Dow Jones industrial average fell 500 points Oct. 19, 1987.

"We try to take advantage of other investors' emotional or irrational reactions," Rodriguez said.

Yacktman agreed, saying investors are resilient.

"Back in 1987, the day of the 500-point decline, I started buying like crazy," Yacktman said. "I spent $40 million that day."

Still, veterans of Wall Street who have seen the financial aftermath of some of history's worst tragedies, from Pearl Harbor to the assassination of President Kennedy, said this crisis is unprecedented.

"Events like this bring things to a halt and raise a level of shock that is difficult to describe," said Alan Ackerman, executive vice president of the New York brokerage Fahnestock & Co. "This is a huge catastrophe and it's one that has no parallel in history." graphic

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