High-flying Delta Air Lines stock may be revved up too high

Answering the mail

July 17, 1991|By Andrew Leckey

Q. All I hear about is airline bankruptcies. What should I do about my shares of Delta Air Lines? I am happy with the stock, but a little nervous

L A. This carrier's stock price may have flown a bit too high.

Sell and take profits from your shares of Delta Air Lines (around $72 a share, New York Stock Exchange) even though it is a fine company in a strong financial position, advised Mark Daugherty, analyst with Dean Witter Reynolds Inc.

Many investors seeking airline stocks turned to Delta because of its quality and the likelihood that it will benefit from overall industry consolidation.

"As a result, Delta's stock may nw be overvalued, and I see more advantage to selling than to holding at this point," said Daugherty, noting that airline stocks are often considered trading vehicles rather than long-term holds.

Q. My broker has recently been promoting Weyerhaeuser Co. I thought paper companies were bad investments. What's your opinion?

A. Weyerhaeuser Co. (around $28, NYSE), the pulp, paper, packaging and log producer, is an attractive investment even though the recession and weak housing starts hurt its business, said Lawrence Ross, analyst with PaineWebber Inc.

Operating profits were up last year, though earning were down due to some one-time charges.

"The picture is now rosier for Weyerhaeuser because the economy is improving and people slowly will start building homes," explained Ross. "I expect good earning for the company."

Q. What are your thoughts on Wells Fargo? The consensus seems to be bad. Do you agree?

A. You can't bank on a strong performance from this stock.

Problems in its commercial loan portfolio don't bode well for Wells Fargo (around $65, NYSE), and it therefore isn't a positive investment at this time, said Mark Lynch, analyst with Bear Stearns.

For four months, Lynch has been recommending that investors avoid Wells Fargo stock because the outlook for the bank is likely to get worse.

"Though the economic picture is improving, the damage is already done to the bank's loan reserve and the commercial real estate business won't turn around quickly," added Lynch. "There are other better-quality, less-risky bank investments than this one."

Q. I recently located a stock certificate for 225 shares of Walgreen-Sears Co., dated 1907. I'd like to know the value as an investment and a collectible.

A. Despite its promising name, that company had nothing to do with either Walgreen Co. or Sears Roebuck, according to Robert Fisher, vice president with the New York-based R.M. Smythe & )) Co. stock-search firm.

Walgreen-Sears Co. went out of business in the early 1920s without a trace. Your certificate is worthless from a pure 'N investment standpoint, though, if it's in good condition, it might be worth $5 as an anusual collectible, said Fisher.

Q. I am 64 years old, soon to be 65. I'd like to continue working part time at my son's shop. How will my small income affect my Social Security benefits.?

A. An individual who is 65 to 70 years of age has a limit on the Social Security benefits he or she may receive, depending on the earned income, said James Schlesser, tax partner with Deloitte & Touche.

The first $9,720 earned does not negatively affect an individual's benefits. That amount refers to wage income, not interest income or any other type of non-earned income. Once an individual earns more than $9,720 in any given year between the ages of 65 to 70, the benefits are reduced by 33 cents for every dollar over the limit amount.

"Therefore, if you earned $300 over the $9,720, you would lose $100 worth of Social Security benefits," Schlesser said.

Q. I am interested in purchasing shares of Stuart Hall. Do you think this is a good idea?

A. Stuart Hall (around $7, over the counter), a leading producer of office supplies, school supplies and writing paper, is a good low-priced investment choice for long-term growth, said Richard Wholey of Chicago-based Wayne Hummer & Co.

The company's products are sold through large retailers, with Wal-Mart accounting for 21 percent of that business.

"Starting-up costs for a new manufacturing facility and inventory write-downs penalized recent earnings, but the outlook for the rest of the year looks better," said Wholey. "Stuart Hall's earnings should resume the steady growth that has characterized this company since the mid-1980s."

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

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