Investors should have smooth sailing with Carnival Cruise

Answering the mail

July 03, 1991|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. My friend, who follows the stock market, thinks Carnival Cruise is a great buy with great earnings. What do you think? Should I buy?

A.It should be smooth sailing for this stock's investors.

Buy shares of Carnival Cruise Lines Inc. (around $22, American Stock Exchange), the high-profile operator of cruise ships, hotels and casinos, because this company has done well by its investors ever since it went public in 1987, said Paul Mackey, analyst with Dean Witter Reynolds Inc.

Cruising is a growth industry and Carnival's profit margins are excellent, thanks to its fuel-efficient, large ships. The company's strong balance sheet and loyal market share bode well for the future, Mackey believes.

"Carnival Cruise has nearly doubled in size since 1987 due to some timely and well-chosen acquisitions, and its balance sheet will permit it to grow further," said Mackey. "Because the stock is trading at a discount to the market, I'd recommend that you buy it at this time."

Q. I'm worried about my 155 shares of Eli Lilly & Co. With all the bad news about Prozac, should I sell and buy another pharmaceutical stock? What's your opinion?

A. Hold your sales of Eli Lilly (around $75, New York Stock Exchange), producer of ethical drugs, agricultural chemicals and electronic musical instruments, advised Barbara Ryan, analyst with Prudential Securities.

"Sales of Prozac have leveled off the past six months, but they're not declining," explained Ryan. "In our opinion, the suicidal-tendency claims aren't medically sound, though you can't deny the negative effect they've had on the sales of this prescription."

The company is also awaiting approval of several drugs, especially its obesity-fighting medicines. One concern is what will happen when the company's major antibiotic loses its patent protection in late 1992.

Despite all the unanswered questions, Eli Lilly is definitely not a single-drug company and has a quality future, concluded Ryan.

Q. I own 34 shares of Dean Foods Co. and, overall, am happy with my investment. But what's the professional consensus about the company?

A. Investors should be milking profits from this stock for years.

Hold your shares of Dean Foods Co.(around $46, NYSE), which produces dairy and other food products, because the company has strong management, a solid balance sheet and isn't loaded down with debt, advised Roger Spencer, analyst with PaineWebber Inc.

"I'm neutral on Dean Foods stock as far as new purchases are concerned, even though it's attractively priced, but my feelings are mostly a reflection of the fact that I have buy recommendations on some of its competitors," concluded Spencer. "If you already own Dean Foods, continue to enjoy it."

Q. In the early 1970s I purchased 3,000 shares of Torginol Industries Inc. I can find no information on this company. Could you tell me if the stock is valid?

A. That Las Vegas company was an unwise gamble.

The corporate charter of Torginol Industries Inc. was revoked in 1981 and your shares, unfortunately, are worthless, said Robert Fisher, vice president with the New York-based R.M. Smythe & )) Co. stock-search firm.

Q. I am generating income in a state in which I don't reside. Where do I file my state tax return, in both states or my home state? I'm confused.

A. Regardless of where you work and earn income, you must file a state income tax return for the state in which you live, said Robert Greisman, tax partner with Grant Thornton. On that return, you will note income from any other states.

"You are also required in most cases to file a non-resident state tax return in the state or states in which you earned income," said Greisman. "Your own state would then give you a tax credit on your home state tax return for income tax paid in another state."

In some cases, however, bordering states set up reciprocal rules for wage income, so that you file only in your home state. Check your local tax laws, Greisman advised.

Q. I would like your opinion of Citizens Utilities, since my friend invested in it and wants me to do so also. What do you think?

A. Citizens Utilities Class "A" (around $27, over the counter) appears to be a good investment, despite the fact that growth has slowed in some of its service areas and it has no dividend, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

The company provides electric, gas, water, telephone and wastewater services to states in the West, Hawaii and Midwest, as well as paging and cellular communications. Its geographic diversity provides some protection against single-region downturns. Revenues and earnings have increased for 47 consecutive years.

"Citizens Utilities looks promising," concluded Conway. "It hopes reinstate dividends on its Class "B" shares after meeting certain legal and tax hurdles."

Q. About three years ago, I bought Varity Corp. as a turnaround candidate. The company seems to be improving, but its stock has traded in a narrow range with no appreciation. Should I continue to hold?

A. Stock of Canadian-based Varity (around $2.50, NYSE), one of the world's largest farm-equipment manufacturers, will require patience because a couple of quarters of losses are expected do to a worldwide sales downturn, said Richard Wholey of Chicago based Wayne hummer & Co.

" The losses follow 14 consecutive profitable quarters, and, longer term,earnings should rebound nicely," added Wholey." Cost-cutting measures and pent-up demand should be positives for the company."

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

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