Boise Cascade's outlook gloomy, PepsiCo's rosy

Leckey Q&A

December 12, 1990|By Andrew Leckey

Q.My wife and I are novice investors and considering buying small amounts of popular stocks. What do you think about Boise Cascade?

A. You can't paper over this company's problems.

Boise Cascade (around $24 a share, New York Stock Exchange), the big paper and wood products firm, isn't an attractive stock due to the fact that several of its divisions face a difficult road ahead, said Lawrence Ross, analyst with PaineWebber Inc. The pressure involves the uncoated white paper division, which is its largest operation; the coated magazine paper division; and the wood products division.

"Another negative is that Boise Cascade expects to merely break even in the fourth quarter, which indicates the company is not earning its generous dividend yield," added Ross. "The only thing keeping up its stock price is that dividend yield, and it is simply not a healthy condition to pay out more than you are earning."

Q. What are your thoughts on PepsiCo Inc.? Is it bad news, like every other stock today?

A. There's much more than fizz here.

Buy the stock of PepsiCo Inc. (around $25, NYSE), the famous producer of soft drinks, snack foods and food services, because the company is likely to keep on surprising Wall Street with great earnings despite the general weakness in the economy, said George Thompson, analyst with Prudential-Bache Securities.

The company's solid earnings figures, strong balance sheet and long-term potential make its stock price appear undervalued.

"Another plus for PepsiCo is its commitment to expanding overseas, which includes its restaurant operations," said Thompson. "The company is definitely not relying strictly on at-home sales to make its earnings."

Q. I own 200 shares of Deere & Co. and, being a farmer, have always used its products. Should I hold on, or is it time to sell?

A. In the long run, this stock will plow ahead.

Hold your shares of Deere & Co. (around $44, NYSE), the largest manufacturer of farm equipment, even though this is not a particularly prosperous time for its industry, said Robert McCarthy, analyst with Duff & Phelps.

"I like the company and consider it one of the more attractive choices in its industry, but I wouldn't be buying shares right now," said McCarthy.

Deere recently announced layoffs and temporary plant shutdowns in order to avoid holding excessive inventories. The layoffs are a reflection of lower sales and spotlight the overall economic picture rather than anything specifically negative about Deere.

Q. My husband and I own 1,000 shares of common stock in Union Uranium of Colorado. Can you provide us with any information about this stock purchased in 1955?

A. You won't be mining any profit from this stock.

Union Uranium of Colorado, located in Denver, was recapitalized in 1972 and renamed Plytechnic Industries. Under the plan, shares of Union Uranium were diluted by a 1-for-10 split.

"The recapitalization wasn't sufficient to keep the company in business, and its corporate charter was suspended in 1977," explained Robert D. Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm. Because the company is no longer in existence, your shares, unfortunately, are worthless.

Q. My wife and I are first-time grandparents and would like to give our new grandchild $5,000 worth of stocks for Christmas. We are hoping to do this each year for his college education. Is there anything we should know before doing this?

A. There is a potential gift tax, to the extent that the gift exceeds $20,000 for a couple, said James Schlesser, tax partner with Deloitte & Touche. If the gift to a child is $10,000 to $20,000, there is no gift tax, but it must be reported on a gift tax return, he added.

"In your situation, since the gift is less than $10,000, nothing needs to be filed with the Internal Revenue Service and no gift tax is paid," explained Schlesser.

Q. What are your thoughts about Carolco Pictures? I have noticed a lot of attention being given to this stock, but I don't know much about it.

A. Not all of the attention is positive.

Carolco Pictures (around $6, NYSE) finances, produces and leases motion pictures, makes and distributes videocassettes and finances television programs. The success of its "Total Recall" film and its "Teenage Mutant Ninja Turtles" home video have helped this year. However, the third quarter was hit hard by higher-than-expected marketing costs of two new films, "Air America" and "Narrow Margins."

There has also been some unhappiness surrounding the company after it bought back 3.4 million shares from a company controlled by its chairman for double the market price. As a result, a lawsuit has been filed by a shareholder.

"Carolco is in a very competitive field and the recent share buyback leaves a bad taste," said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

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