NYNEX stock dials a 'wrong number' By: Andrew Leckey

Leckey Q&A

December 05, 1990

Q. My 150 shares of NYNEX Corp. seem to be going down into the dumps. Do you think I held on too long? Should I sell?

A. This telephone stock is a "wrong number" right now.

Sell your shares of NYNEX Corp. (around $70 a share, New York Stock Exchange), the beleagured company which provides phone service to New York and New England, advised James McCabe, analyst with Nomura Securities.

That has been McCabe's investment opinion following NYNEX's latest rate ruling and a consent decree approved by the Federal Communications Commission, stemming from allegations of overcharging customers. NYNEX must pay $1.4 million to the Internal Revenue Service, cut interstate rates through a tariff and follow strict accounting requirements. All of which puts the company under closer federal and local scrutiny.

"While the $1.4 million contribution to the IRS was reflected in NYNEX third-quarter earnings, the company's earnings had already suffered from an employee strike and a very slow economy in the Northeast," said McCabe. "The combination amounts to bad news for investors."

Q. We bought 50 shares of IBM when its price was suffering. There seems to be some improvement in the price. Is it time to buy more, or simply get out while we're ahead?

A. Big Blue is coming back.

International Business Machines (around $113, NYSE) the famous computer and information systems company, is a stock worth holding because the company is benefiting from its ambitious cost-cutting and restructuring moves, said Patricia Laupheimer, analyst with Shearson Lehman Brothers.

IBM indicates it will continue its cost-cutting and its attempts to sell some of its office products business. Furthermore, the stock has a solid dividend yield that looks good to both new and existing investors.

"IBM has been enjoying strong demand for its mainframe units and microcomputers," explained Laupheimer. "I see the company as a long-term turnaround story with a happy ending for investors."

Q. What are your thoughts about Pier 1 Imports as an investment?

A. Don't take a long walk off a short pier with this stock right now.

The stock of Pier 1 Imports Inc. (around $5, NYSE), the import specialty store, doesn't have much to recommend it due to the weak condition of the retail industry and its stocks, said Dennis VanZelfden, analyst with Rauscher Pierce Refsnes.

The company's November sales did rise impressively, although those figures did include earnings of its newest acquisition, Sunbelt Nursery Group.

"Although Pier 1 is a well-run company with a distinct product line, it will see undoubtedly a slowdown in earnings," said VanZelfden. "That's why I feel great about the company long-term, yet give it a neutral rating for the time being."

Q. Could you please tell me the status of Evans Products Inc.? I own several hundred shares and have lost track of the company.

A. This company is better off lost.

Evans Products Inc., incorporated in Delaware with offices in Miami Beach, Fla., filed for bankruptcy in 1985. The plan of reorganization under Chapter 11 of the bankruptcy code was confirmed by the courts in 1986. Unfortunately, there was no stock equity at that time and your investment is now worthless, according to Robert D. Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

Q. My wife and I file estimated quarterly tax returns. This month we sold $17,000 worth of stock due to a family emergency. How will this additional income affect our quarterly returns?

A. The Internal Revenue Service requires that you report as income the amount of gain on the sale of that stock, said James Schlesser, tax partner with Deloitte & Touche. The amount of gain is determined by taking the cash you received, minus what you paid originally for the stock.

"Assuming that you made this transaction in the fourth quarter of this year, you must on Jan. 15, 1991, (the fourth-quarter filing date) pay gains along with your usual quarterly payment," concluded Schlesser.

Q. What are your thoughts on Mitel?

A. Doesn't look like this stock will be a "mighty mite" again for a while.

Mitel Corp. (around $1.50, NYSE), Canadian manufacturer of telecommunication systems, microprocessor switching equipment and integrated circuits, is a highly speculative investment, according to Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

The company in recent years has incurred significant losses, reflecting tremendous competition in the PBX market. British Telecommunications, holder of a 51 percent stake, may sell all or a portion of its stake.

"Mitel's earnings per share for the past fiscal year plummeted on weak domestic sales and higher research costs," said Conway, noting that losses have continued in this fiscal year as well. "I would put off any purchases of the company's shares until the bottom line improves."

Q. Can you comment on Rollins Environmental? This stock has been recommended to me.

A. You must be willing to accept an environment of volatility with this stock.

Rollins Environmental Services (around $8, NYSE), a leader in the incineration and disposal of hazardous wastes with treatment facilities in New Jersey, Texas and Louisiana, is beginning to show improved earnings after some difficult times.

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

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