Shades of the early ’70s: A highflying stock market faces a risky encore of Wall Street overexuberance that could clobber a number of widely held, well known growth-type stocks, all of which are darlings of the institutional fraternity.

That’s the conclusion of an unusual and intriguing study recently conducted by one of the country ‘s best-known investment newsletters, the Dow Theory Forecasts of Hammond, Ind.

The early 1970s was the era of the “Nifty Fifty,” a stumbling market period when a group of 50 bigname growth stocks — the likes of Kodak, Xerox, IBM, and Avon products — dazzled Wall Street. They all had spectacular runs before eventually running out of gas and plummeting in price.

Reality caught up with these stocks for a couple of very obvious reasons. Their price/earnings ratios, some of which approached multiples of 90 and 100 times earnings, were out of sight. But, by and large, they were flying high based on unrealistically high growth assumptions that failed to factor in increasing competition, changes in the marketplace, or excessive size, which eventually causes the growth of all companies to slow. In effect, their P/Es left no margin for error because the stock prices presumed nothing could go wrong.

One of the biggest of the winners in those days was Polaroid. Despite a dizzying P/E multiple — it was in the 90s — Polaroid was touted by an Oppenheimer & Co. analyst, Ralph Kaplan, as a stock that you simply had to own because of his vision of explosive earnings.

He could have used a better pair of eyeglasses. Stung by intense competition and, later, the advent of digital photography, Polaroid ran into land mines. It never achieved Mr. Kaplan’s lofty growth assumptions and subsequently went bankrupt.

The big problem here: the Nifty Fifty turned out to be another one of those Wall Street manias, as investors overpaid for growth that simply couldn’t be sustained.

What makes this happening of the 1970s so relevant right now is that growth stocks — following roughly nine years of underperformance, relative to value-oriented stocks — are currently being pushed by many Wall Street pros as strong 2007 comeback candidates and likely market outperformers for the year ahead.

The problem, as a veteran investment adviser, Richard Moroney, sees it, is that the growth concept being pushed could once again be mostly illusory, though on a lesser scale than in the Nifty Fifty era. His rationale is that investors are again being pitched a variety of companies that sport superior projected growth rates (highly suspect in many cases), and whose astronomical multiples place their stocks in the unenviable position of being vulnerable to sharp decline when the present spell of market euphoria runs its course.

Mr. Moroney ‘s Dow Theory Forecasts study examined a variety of growth stocks from a very different perspective — their growth duration. In brief, how long must a company continue increasing profits at Wall Street’s estimated above-average growth rate to justify its current stock price? (A company’s growth rate and its P/E relative to those of the general market were factored in.)

The study came up with a shocker: Eight widely held growth-oriented companies would have to show superior growth rates for, in the best case, 21.5 to more than 86 years to be able to justify their current stock prices. In all eight cases, Mr. Moroney, the newsletter’s editor and research chief, tells me, the multiples are inflated, the growth prospects are already discounted, and the stocks should be sold.

Here’s a rundown of the eight, plus the growth duration (the years of superior growth rates the study concluded would be necessary to justify their present prices) and their trailing 12-month multiples:

• International Game Technology: 86.1 years P/E: 29.8
• Adobe Systems: 68.3 years P/E: 33.6
• Fifth Third Bancorp: 63.4 years P/E: 19.2
• Clear Channel Communications: 54.5 years P/E: 26
• Marriott International: 28.7 years P/E: 27.1
• Harrah’s Entertainment: 28.3 years P/E: 25.5
• Electronic Arts: 60.1 years P/E: 26.7
• Intel: 21.5 years P/E: 24.3

The letter also came up with a list of 10 growth-oriented companies that it felt had very attractive growth durations. They were Aflac, Burlington Northern, Canadian National Railway, Harris, Schlumberger, Target, TJX, Union Pacific, UnitedHealth Group, and Walgreen.

The bottom line, though, is growth-stock buyer beware. While every investor is shopping for one of those spectacular growth stocks that can dazzle the Street with the potential for above-average earnings over a prolonged period and shoot up in price, what may look like growth, be touted as growth, and smell like growth, may not always be growth.

dandordan@aol.com