Market phase favors selective stock picker

The ''easy'' money has been made on Wall Street. Now, if investors want to see their assets increase, they will have to do some homework. This is the message many investment advisers are passing on to their clients as the bull market enters its 10th month.

The reasoning on Wall Street is simple: The decline in interest rates is probably over for some time. Rates may not rise much, either, but the market will not be able to draw much strength from lower yields. Stocks that saw their price-to-earnings multiples increase as interest rates fell will stabilize.

''Now it's stock-picking time,'' exclaims Larry Wachtel, vice-president for research at Prudential-Bache Securities Inc. ''You can't just throw a dart at the stock tables and make some money.''

Monte Gordon, director of research at the Dreyfus Corporation, agrees, noting: ''The market has lost its air of swaggering bravado. . . . Now you have to be more intensely aware of the potential of the company to grow and increase its earnings at an acceptable rate.''

This is the same message Salomon Brothers Inc. has been giving its institutional customers. In its most recent Portfolio Managers' Advisory, the big broker commented, ''During the next nine months, we expect the fundamental outlook for individual companies to take on increasing importance.''

In picking stocks, Salomon Brothers advises looking for companies with the following characteristics: ''a strong balance sheet; good cash flow; limited external-financing requirements; the ability to deliver unit volume growth; and a management committed to cutting costs.'' In addition, the companies should be able to generate 30 percent or better gains in earnings this year and next year.

Among Salomon's choices are Clorox, McDonnell Douglas, Chase Manhattan Corporation, Pepsico, Boise Cascade, Air Products & Chemicals, IBM, Digital Equipment, Motorola, American Express, LTV, Pennzoil Company, Gannett Company, the New York Times, and MCI Communications.

Richard McCabe, vice-president for market analysis at Merrill Lynch & Co., likes the large-capitalization consumer stocks, such as restaurant chains and food-and-beverage firms. He also recommends some of the consumer cyclicals such as auto-equipment and appliance companies, and he expects further gains in such interest-rate-sensitive groups as housing, banking, and insurance.

Mr. Wachtel of Pru-Bache says he prefers high-technology stocks - particularly computers, semiconductors, and instrumentation companies - as well as defense companies and some health-care companies. Mr. Gordon agrees that the high-tech stocks still look good, but he cautions: ''You have to be wary of new issues and buy just the upper level. You have to impose quality standards.''

Robert Gintel, head of the Gintel Fund, a no-load mutual fund, as well as the Gintel ERISA Fund, is known as a stock picker. His most recent pick, however, has surprised a number of people: He likes US Steel. ''I see it as a major turnaround situation,'' he comments. It has gone from 38 to 31 mills and has closed or consolidated many of its facilities.

''If our perception of the company is right,'' Mr. Gintel says, ''it has not been given due weight to the changes that have taken place. When the economy picks up, the leverage is greater on the upside.'' By the fourth quarter, he forecasts, US Steel will be in the black, and by 1985 he expects earnings of $15 to $20 a share, rather than the loss of $3.99 a share in 1982. The last time US Steel had decent earnings, the stock hit $60 a share and was split 3 for 2.

Gintel has put his money where his mouth is. His $84 million Gintel Fund has 850,000 shares of US Steel, and his $43 million ERISA Fund has 600,000 shares (or 15 percent of its assets) in the steelmaker.

Despite Gintel's optimism, US Steel's stock ended on the downside last week, closing at 241/8, down 11/4.

Concern over interest rates buffeted Wall Street last week, dropping the Dow Jones industrial average 16.93 points; it closed at 1,196.11.