FUND Q+A: Seligman's Alpert doesn't see rally derailed

By Chuck Mikolajczak

NEW YORK, Oct 21 (Reuters) - It may be hard to believe a year after the late 2008 debacle, but potential obstacles to the rally appear few and far between, says Michael Alpert, head of Seligman Investments' small-company growth team.

The firm is part of RiverSource Investments, which had about $135 billion in assets under management as of June 30.

Alpert said he thinks solid earnings will help drive stocks higher, with an added boost from year-end "window dressing" when portfolio managers sell laggards in favor of outperformers in an effort to spruce up their portfolios at quarter's end.

While stocks may plateau somewhat in November, Alpert thinks the consumer may be coming back. He's looking forward to Black Friday, one day after Thanksgiving and the largest shopping day of the year, as a potential signal for more gains in equities through year-end. WHAT IS YOUR BEST INVESTMENT THIS YEAR? WHY? DO YOU STILL OWN IT? Our largest holding is Nuance Communications NUAN.0. That's a big position for us. FTI Consulting (FCN.N), Orion Marine Group (ORN.N) are some others. Best performer? Omniture -- which just got taken out -- was a good one. WHAT WAS YOUR WORST INVESTMENT? WHY? DO YOU STILL OWN IT? Huron Consulting Group (HURN.O). We still own it. It's a consulting firm, it does a few different types. They spun out of Arthur Andersen ... the past five to six years they've been acquiring small, niche businesses.

Then an accounting issue popped up, which is not good when you bill yourself as an accounting expert. It wasn't really that big of a deal, but the market is just the market, it went down 70 percent in a day. People just thought Arthur Andersen all over again, that it was going to go away. It hasn't happened and it's bounced back. WHAT IS YOUR YEAR-END TARGET FOR THE S&P? I think we can get to 1,200 on the S&P 500. I can't believe the run either, but I still think we go higher. I think that there is just nothing that is going to stop it by year-end. You saw with Intel, numbers are good, for the most part, that will be a catalyst for stocks. It's the end of the year, so everyone is kind of chasing performance. Nobody really wants to take their foot off the pedal right now. WHAT DO YOU MAKE OF CORPORATE EARNINGS BEATING ESTIMATES THROUGH COST-CUTTING? That's been the way since the first quarter. When you saw earnings in the first quarter, nobody beat the top line, but everyone beat the bottom line because of cost cutting. The Street had come way down on estimates, so it was kind of easy to beat.

In the second quarter, it was some of the same story, and we also had green shoots and some of the other stuff. But still, nobody was beating the top line. It was all done through cost-cutting. And people beat the bottom line again.

Now in this quarter, it will be the last quarter where you can really get away with that. Now people are like, "OK, you're up 90 percent, it's all been cost-cutting, when are you going to show us the top line?" If this weren't the 4Q, it would be happening now. WHAT HAS BEEN YOUR FUND PERFORMANCE OVER THE LAST YEAR? We're having a good solid year, but I'm scared to death that this market is going to run away from us. I want to sell some stuff because it's run a lot, but every time I sell, it's a bad sell. And if it is going to go up another 20 percent, I have to stay in the game.

Year-to-date [as of Oct. 15, 2009] we are up 33 percent. We were down 40 percent last year, so we are negative for two years. And that is the risk. At the end of the year, it's a little bit of a game of chicken. DO YOU SEE ANYTHING THAT WILL CATCH US OFF GUARD AND MAKE US BOTTOM OUT? No. We scratched our head and said, "What is going to derail this thing?" We don't think it will be earnings. There is always a little company that blows up or something, but most of the bellwethers were smart enough to get conservative guidance out there. The Street has gone way overboard on the downside cutting numbers. The only thing is if Black Friday is a real negative. But we're not seeing it. (Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)