Chemistry isn't right for DuPont in the short term

Leckey Q&A

May 15, 1991|By Andrew Leckey

Q. We own 23 shares of DuPont and have generally felt that it is a good, solid investment. Do you think this stock will turn around when things get better in the economy?

A. The chemistry isn't right just yet.

Near-term prospects are merely so-so for E.I. DuPont de Nemours (around $43 a share, New York Stock Exchange), but its long-term outlook is promising, according to John Roberts, analyst with Merrill Lynch & Co.

The first quarter reflected a weakness in chemicals due to recession, while the company's Conoco oil division performed just as well as other international oil companies. The second quarter looks to be more of the same, Roberts predicts.

"Hold on to your DuPont shares, for the company's earnings will improve as the economy turns around and chemicals pick up," said Roberts, who believes a DuPont rebound will be quick once the economy does improve. "It has superior management and a dominant position in most of its markets."

Q. What are your thoughts on H.J. Heinz Co.? It seems everyone is now positive on food company stocks. What do you think?

A. Your anticipation of good things should be rewarded.

There may currently be better food company investments than H.J. Heinz (around $38, NYSE), but it's hard to overlook its name-brand recognition and strong balance sheet, said Roger Spencer, analyst with PaineWebber Inc.

The company's Weight Watchers frozen products, which have led the corporate growth in recent years, have lost some business to the Healthy Choice entries introduced by ConAgra. However, strong international results are bolstering the Heinz bottom line.

"Heinz has superior growth and its stock is selling at a discount," explained Spencer. "This company has a proven track record of positive return on investor equity, so you really can't go wrong long-term."

Q. What are your thoughts on General Mills? I am a new investor and would like to buy some shares.

A. General Mills (around $58, NYSE), the well-known consumer goods company, offers terrific stability through a strong balance sheet and fine management, said Craig Carver, analyst with Dain Bosworth.

Its lucrative Big G breakfast cereals division is holding on to its impressive gains of the past two years, its Betty Crocker products remain big sellers and its Olive Garden restaurants are successful.

"I suggest you accumulate shares, doing so on price weakness whenever possible," said Carver.

Q. Recently, I found while going through my father's things some certificates for shares of American Home Builders Inc. Is the company still in existence?

A. There's nothing to build on there.

American Home Builders Inc., incorporated in 1924 with offices in Beechwood, Ohio, had its charter canceled by the State of Ohio Tax Department in 1935.

Your certificates, unfortunately, are worthless, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

Q. The Internal Revenue Service just notified me of an audit for one of my old tax returns. I have no idea what to do. Can you help?

A. If the IRS is auditing an individual for a specific review, it will list the specific areas it is looking into, explained Barbara Pope, tax partner with Price Waterhouse. It will supply you with a list of documents, such as canceled checks and receipts, which it requires that you bring to the audit.

It is in your best interest to bring all documents necessary to substantiate the tax return, so you won't have to come back to the IRS office again.

"If you can substantiate all the requests being made by the IRS, then you can go in on your own," said Pope. "However, if this return was handled by a preparer or an accounting firm, you may want them to accompany you or represent you."

Q. We own 225 shares of Dynascan and haven't received a dividend for a number of years. The price of the stock is down 50 percent from our purchase price. Is this time to buy, sell or hold?

A. Hold your shares of Dynascan Corp. (around $5, over the counter) and add to your holdings on any positive news, advised Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

Dynascan designs and sells citizens band radios, radar detectors, audio and video systems, telephones, answering machines and other electronics under the Cobra brand name. It also owns Lloyd's consumer electronic lines.

She's convinced that patient investors will be rewarded. A repurchase program of 1 million shares over the next couple of years, growing sales in name products, and an improving economy should all combine to make the company's prospects brighter.

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