Loyal and well-heeled clientele keeps Club Med frolicking Leckey Q&A

October 31, 1990|By Andrew Leckey

Q. My travel agent friend keeps raving about Club Med. D you think it is a good investment now? Is anyone really traveling with all the problems in the U.S. economy?

A.It might be time to say: "Pass the pina coladas, dear."

Buy shares of Club Med Inc. (around $19 a share, New York Stock Exchange) the well-known operator of vacation resorts, for it has built a loyal and well-heeled clientele from throughout the world, not the U.S. alone, said Carolyn Levy, analyst with Lehman Brothers. Not all nations are in the same shape as the U.S. economy, she noted.

"Many upper- and middle-income individuals enjoy the exotic locations and the Club Med atmosphere, even if their visit is not an extended one," observed Levy, pointing out that a lot of recent promotional effort has been aimed at luring the middle-income traveler.

"Club Med is a medium-risk investment, most of the risk due to the cyclical nature of the entire leisure business, with factors such as weather and political conditions at specific clubs affecting the bottom line."

Q. I am retired and have owned 150 shares of Xerox Corp. for many years. The stock has been hitting lows I didn't think were possible. Is it time to sell?

A. No one would want to copy this firm's recent stock performance.

Nonetheless, hold your shares of Xerox Corp. (around $33, NYSE), the copier and duplicator company, because its stock price now accurately reflects the firm's exposure to rising interest rates and economic uncertainty, said Alex Henderson, analyst with Prudential-Bache Securities.

Purchases of big-ticket items such as copiers are typically postponed until the economy is stronger. In addition, rising interest rates negatively affect Xerox's real estate division.

"While these two factors have pushed the stock to current lows and I can't see anything that would move the stock up, I believe the dividend is safe and the stock worth holding," concluded Henderson.

Q. My wife and I would like to buy some shares in MCI Communications. With a weak stock market, do you agree that this is the appropriate time to do so?

A. This stock isn't a wrong number.

Stock of MCI Communications (around $28, over the counter) is worth buying because it is inexpensively priced, due to concerns about the overall long-distance business and the cost of increasing market share, said Gregory Sawers, analyst with Sanford C. Bernstein & Co.

"There is a risk perception with this stock, yet I feel MCI will see it all through and will find that many of its other business costs continue to decline," predicted Sawers, who also notes that the current pricing environment in the industry is relatively stable.

"As all of the concerns are dealt with, MCI's stock price will rise and its investors will reap some nice benefits."

Q. My husband and I have held our shares of Motorola Inc. sinc the 1960s and they have been generous to us. Since earnings haven't been all that good, is it now time to sell?

A. This company has plenty more up its sleeve.

Hold your shares of Motorola Inc. (around $51, NYSE), the electronic equipment and systems firm, for this company is excellent at expanding market share and making technological advances, advised Stuart Johnson, analyst with Wertheim Shroder & Co.

"While recent earnings have led us to question whether Motorola is as determined to improve its return on equity as it had stated earlier in the year, I'd wait for another earnings report or two before I got out," said Johnson.

Motorola's willingness to spend money on research has helped it dominate portions of the cellular and wireless communications industry. Recent earnings were up about 15 percent and sales up 12 percent, Johnson noted.

Q. I hold shares dated July 1962 in Pacific Nutrient and Chemica pTC Co. Can you tell me the status of this organization?

A. This investment wasn't too nutritious for its investors.

Pacific Nutrient and Chemical Co. changed its named to Eastern & Pacific Industry Corp. in 1969, according to Robert D. Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

The last market for the stock under the new name was in late 1971 at a 2-cent bid. The company was involuntarily dissolved in 1978 with no stockholder equity remaining. Your shares, unfortunately, are worthless.

Q. I have 600 shares of stock in IPALCO Enterprises Inc Quarterly dividends are reinvested. I am retired and don't need the money right now. Should I hold on and simply let the investment grow?

A. Don't pull the plug.

IPALCO Enterprises (around $26, NYSE), holding company for Indianapolis Power and Light, is a suitable investment for a conservative individual, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

"IPALCO yields better than 7 percent, has a respectable record of raising dividends and has no nuclear problems because its fuel mix is nearly 100 percent coal," said Conway, who says the investor should expect a total return of around 11 percent.

"If you have no need for the extra income at this time, reinvesting the dividends is a painless savings program which you can end at any time."

Q. My sister and I work for a non-profit hospital and recentl received a notice about a new company investment plan. The plan is called a non-profit group annuity. Do you think this is a good idea for us?

A. The non-profit group annuity is similar to having a deductibl ,, individual retirement account or a deductible 401(k) retirement plan, said Barbara Pope, tax partner with Deloitte Touche. It is, however, offered only to non-profit entities.

"The plan that your employer is offering permits you to save money for retirement that you don't have to include in your taxable income, so it does make sense to contribute," advised Pope.

Andrew Leckey answers questions only through his column. Address inquiries to Andrew Leckey, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill. 60611.

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