Wrigley's stock should hold flavor Exxon still a good buy

Leckey Q&A

January 30, 1991|By Andrew Leckey

Q. My broker is recommending that we purchase William Wrigley Jr. Co. stock, but I am hesitant to buy any stock right now. Is it as good as my broker says it is?

A. This investment should keep its flavor a long time.

Buy shares of William Wrigley Jr. Co. (around $51 a share, New York Stock Exchange), the famous chewing gum firm, because it's an excellent company with a proven record of achievement, said Dick Elam, analyst with Blunt Ellis & Loewi.

Wrigley has provided shareholders with consistent earnings and impressed consumers by adding new brands of chewing gum. For the past five years its shining star has been EXTRA, a sugarless gum which is enjoying sales momentum overseas as well.

"Due to the economic environment, Wrigley's earnings are slowing, but that's nothing to worry about," concluded Elam. "I anticipate a 10 to 12 percent earnings growth rate."

Q. My wife and I have come into a little money and are considering investing in Exxon. Do you think this is wise?

A. The underlying fundamentals of this stock, rather than the firm's handling of the infamous Alaskan oil spill, are reasons why many experts still hold it in high investment esteem.

Exxon Corp. (around $50, NYSE), the oil and gas production and marketing firm, is a stock worthy of purchase mostly based upon oil price increases, said Frank Knuettel, analyst with Prudential-Bache Securities.

"No matter what the result in the Middle East, oil prices will likely settle higher than they were before that mess began," said Kneuttel. "The company is expected to increase its capital spending, which will enhance research and development."

Q. We have 300 shares of Energy Exchange Corp., purchased in 1982. We don't know what happened to this company. Can you help?

A. Little energy was exchanged.

Energy Exchange Corp., incorporated in Delaware with offices in Tampa, Fla., had persistent financial difficulties and two failed Chapter 11 reorganization plans. The company was declared insolvent in federal Bankruptcy Court in 1986.

Unfortunately, no stockholder equity existed and your investment is worthless, said Robert D. Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

Q. I am considering selling my 150 shares of American Express. I've heard that its credit card division is having some problems. What do you think?

A. There is reason for concern, but you've focused on the wrong reason.

The credit card division is actually one of the better aspects of American Express (around $20, NYSE), the financial services and travel giant, said Michael Lewis, analyst with Dean Witter Reynolds Inc.

While that division is starting to slow down, it isn't experiencing the serious difficulties of the Shearson Lehman Brothers Inc. division. That operation has been battered by a slowing economy and fewer investors. Further branch office closings and consolidations are under way.

"Now is not the time to be selling your American Express stock, and I would hold," advised Lewis. "While the company's overall earnings won't be positive, wait to see if the stock picks up some momentum."

Q. We received a notice for an Internal Revenue Service audit for our return of several years ago. Unfortunately, I do not know if I have the receipts for all the expenses which I deducted for that year. Should I panic? What is the worst-case scenario?

A. If you don't have the actual receipt or voucher to justify that expense, gather as much collaborative information as you can for each deduction, counseled James Schlesser, tax partner with Deloitte & Touche. Datebooks, calendars or a credit card statement are examples.

"The IRS, in certain cases, accepts indirect proof that expenses were incurred," said Schlesser. The worst-case scenario is that the IRS will disallow your expense deduction and charge you the tax, interest (as of the year you should have included it on your filing) and exact a penalty for claiming an unjustifiable expense, Schlesser said.

Q. One of my stocks, Sudbury Inc., really fell off the cliff in 1990. Should I sell and take a beating, or is there a chance it will come back? I don't need the money.

A. Good thing you don't need the money.

The future doesn't look bright for Sudbury Inc. (around 50 cents, over the counter), a diversified manufacturer of industrial products primarily for cars and trucks, said Richard Wholey of Chicago-based Wayne Hummer & Co.

Due to the downturn in car and truck sales, it seems unlikely Sudbury will have any meaningful upturn in sales this year. It is also struggling with a large amount of debt on its balance sheet and hasn't paid its preferred dividend payments for more than a year.

"At their present extremely low stock price, you should hold your Sudbury shares," counseled Wholey. "Selling would net you little and there is a chance that a rebounding economy in the second half of 1991 will bail the company out of its current troubles."

Q. My broker has recommended Bob Evans Farms stock. What do you think?

A. This investment belongs on your menu.

Bob Evans Farms (around $15, OTC) looks like a good near- and long-term investment, according to Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

The company operates 241 family-style restaurants in the Midwest and Southwest, manufactures and distributes 25 varieties of pork sausage products, and has five Midwest and two Texas processing plants. While it reported its first decrease in earnings in 20 years in fiscal 1990, it looks as though a recovery is on the horizon.

"Bob Evans plans more outlets for this year and the sausage division should stay strong despite recession," explained Conway. "An 18 percent increase in profits is expected."

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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