Woolworth stock too cheap to sell despite adviser's say-so

Leckey Q&A

October 10, 1990|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. My investment adviser has been telling my wife and me to get out of retailing stocks. I would appreciate your opinion as to whether I should sell or hold my F.W. Woolworth Co. stock.

A. Stocks like this one seem to nickel-and-dime their shareholders to death.

You should hold your stock in F.W. Woolworth Co. (around $24 a share, New York Stock Exchange), the famous variety and apparel store chain, simply because its price is too cheap to make selling worthwhile right now, advised Daniel Barry, analyst with Kidder, Peabody & Co.

One positive is that Woolworth's, which had 250 stores in West Germany, is expected to be the first retailer to expand into the remainder of the newly united Germany.

"Unfortunately, as a result of the Middle East crisis, retail stocks such as Woolworth's will underperform the stock market," predicted Barry. "A slowing economy will hurt the chain."

Q. My wife and I have been waiting to sell our Wendy's International shares until the time was right. However, with this current market, I haven't a clue as to when that would be. What do you think?

A. Shareholders might well ask: Where's the beef in this investment?

Sell your shares of Wendy's International (around $6, NYSE), the heavily advertised owner and operator of fast-food restaurants, because it is trading at a price that is higher than its earnings seem to justify, said Michael Mueller, analyst with Montgomery Securities.

"Wendy's earnings have been sluggish for some time," concluded Mueller. "Its cost-cutting measures have improved its bottom line, but that is not really an indication that people are buying more of its products than in the past."

Q. I would like to invest in Schering-Plough, based on a friend's recommendation. What do you think?

A. While one should generally beware of friends bearing stock recommendations, in this case the pick may be justified.

Schering-Plough (around $43, NYSE), maker of drugs and personal-care products, is worth buying due to solid growth in its pharmaceutical and over-the-counter prescription businesses, said Richard Vietor, analyst with Merrill Lynch & Co.

In addition, a recessionary economy shouldn't hurt a quality drug company such as Schering-Plough, since people will still need to buy medicine.

"A real plus is Schering-Plough's Interferon drug, sold under the name Intron A," said Vietor. "A recent medical study found that the drug can treat people with hepatitis B, and the company is awaiting Food and Drug Administration approval to market it for that purpose."

Q. As executor of my father's small estate, I came across stock certificates for 11 shares of Franklin Plan Corp. stock. I have no information on this company or its stock and would like to know more.

A. Unfortunately, everything worth knowing is bad.

The Franklin Plan Corp., incorporated in Delaware in 1931, was a personal finance company rife with mismanagement and fraud. Put into receivership for bankruptcy in 1933, its assets were liquidated and the proceeds were insufficient to pay creditors, according to Robert D. Fisher, vice president with the New York-based R.M. Smythe & Co. Inc. stock-search firm.

As a result, stockholders received nothing and your shares are worthless.

Q. We are a regular corporation small in size that would like to make a charitable contribution for tax deduction purposes. What are the rules governing this? How much of our gift can we deduct?

A. Corporations can make charitable contributions and take deductions for them, said Robert Greisman, tax partner with Grant Thornton. There are, however, limitations.

"A corporation may take a deduction for a gift up to 10 percent of the taxable income of the corporation," explained Greisman. "Taxable income is computed without regard to that contribution and without regard to certain special and unique deductions usually applicable to larger, more intricate corporations."

You can contribute more than 10 percent of taxable income and it may carry over to next year, so long as next year's charitable contributions don't meet and exceed the 10 percent limit, said Greisman.

Q. What's the matter with my American Colloid Co. stock? Last fall, I read that this company had a super absorbent material that was being used in diapers. Was this a hoax?

A. No hoax, just a downturn in the overall stock market.

American Colloid (around $9, over the counter) is one of the world's principal suppliers of bentonite, a clay used in many different products. It has entered specialized markets such as cat box filler and absorbent materials for diaper manufacturers, yet its largest market is the metal-casting industry.

Q. Can you tell me if my 4,000 shares of associated Medical Devices have any value and if the company is still in existence? A. This company is basically on a life-support system.

Associated Medical Devices Inc., last based in Reno, Nev., is still legally in existence, but has been on inactive status since late 1989, according to Robert D. Fisher of the New York-based R.M. Smythe & Co. stock-search firm. At this point, the firm runs the risk of losing its charter.

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