Colgate-Palmolive cleans up in downturn

Leckey Q&A

January 09, 1991|By Andrew Leckey

Q. What are your thoughts on Colgate-Palmolive Co.? Is it as recession-proof as some experts claim?

A.Hopefully, people continue to brush their teeth whether or not there is recession.

Colgate-Palmolive (around $74 a share, New York Stock Exchange), the well-known household and personal-care product firm, is a stock worth buying because its product mix is defensive and prospers even in economic downturns, said Deepak Raj, analyst with Merrill Lynch & Co.

Colgate-Palmolive's earnings are expected to continue to grow steadily. In addition, a large portion of the company's business comes from foreign operations and this area has been growing )) rapidly.

"The company's products are identified with U.S. quality production, and Colgate-Palmolive will soon enough benefit from brand-name recognition overseas, as it already does here in the United States," concluded Raj.

Q. My wife and I are in our 60s and have owned General Motors stock since way back. Everyone is telling us to sell, but we want to hold on and give these shares to our grandchildren. What's your opinion?

A. Stay at the wheel.

Hold your stock in General Motors (around $35, NYSE) even though that famous carmaker recently announced plant closings and operation cutbacks in anticipation of slower U.S. car sales, said Ann Knight, analyst with PaineWebber Inc. The company does expect to post a gain in 1991, she noted.

"GM has been concentrating on overseas ventures so that it can profit from European expansion," said Knight, who is merely neutral on the stock in terms of new investment. "For example, it announced a joint 10-year agreement between a GM unit and Saab, through which its information systems will be provided to that Swedish carmaker."

Q. My broker is strongly recommending purchase of Eli Lilly stock. I am suspicious and didn't think any stocks were worth buying at the present time.

A. Your personal attitude toward the market right now is up to you, but this stock is clearly a star among what is available.

Buy shares of Eli Lilly & Co. (around $72, NYSE), which produces ethical drugs, agricultural chemicals and electronic medical instruments, because it is likely to experience double-digit profit growth, said Jerome Brimeyer, analyst with Dean Witter Reynolds Inc.

The primary reason is its drug Prozac, originally marketed as an anti-depressant and more recently found to aid in the fight against obesity, said Brimeyer. The foreign potential of the drug should add to Lilly's sales.

"In addition, Lilly has always maintained steady and strong earnings thanks to its antibiotic product line, which contributes more than 30 percent of company revenues," said Brimeyer.

Q. I purchased 100 shares of Aconic Mining Corp. in 1962. I was wondering if the company is still around, or if it merged with another company.

A. This Canadian firm didn't mine many profits.

Aconic Mining Corp., incorporated in 1952 in Quebec, Canada, had surface rights for mining at Altchford, Ontario. Unfortunately, the company lost its corporate charter in 1974 and your stock is worthless, according to Robert D. Fisher, vice president with R.M. Smythe & Co.

1 I just finished my first year as a business owner and, unfortunately, have more losses than profits. Can I claim some of these losses next year, when I am anticipating some gains?

Q. Losses from a trade business or sole proprietorship are

deductible in the year in which they occurred and you must report them for that year, said James Schlesser, tax partner with Deloitte & Touche.

A. In 1988, I purchased 200 shares of Tacoma Boatbuilding Co. as a long-term investment. Recently, the company did a reverse split. Should I continue to hold, or should I sell?

Q. It's a little late in the game. This leaking ship is taking on a lot of water.

Tacoma Boatbuilding (around 30 cents, NYSE), which designs, builds and repairs high-tech ships for the government and commercial customers, has a rocky future which may include filing for federal bankruptcy protection, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

It has suffered quarterly losses as high as $2 million due to a declining U.S. government market for its products and the costs of diversifying into the yacht business.

"Tacoma Boatbuilding has already suspended operations in Washington, Wisconsin and Florida due to a lack of operating funds and has been unable to obtain more working capital," said Conway, noting the recent company comments that it may file for bankruptcy.

A. What's your opinion on a stock called M.S. Carriers?

Q. It's an investment to stick with for the long haul.

M.S. Carriers (around $18, over the counter), a high-quality specialized trucking firm that operates primarily in the eastern part of the United States, is a wise selection, said Richard Wholey of Chicago-based Wayne Hummer & Co.

A driver shortage and effects of the soft economy will likely result in flat earnings this year, yet growth is expected to resume in 1991. For the previous five years, average annual earnings growth exceeded 25 percent.

"At its present price, which is less than 10 times earnings, M.S. Carriers stock has excellent growth and recovery prospects," said Wholey. "I'd add this stock to your portfolio."

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

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