PepsiCo Inc. offers a refreshing opportunity for investment

Answering the mail

August 28, 1991|By Andrew Leckey

Q.My husband and I are always battling about Coke vs. Pepsi. Now I want to buy PepsiCo stock. Do you think this is a good idea, since Coca-Cola has won the cola wars?

A.Stop battling. Both of those companies offer refreshing prospects.

Although Coca-Cola Co. is the No. 1 soft drink, PepsiCo Inc. (around $32 a share, New York Stock Exchange) has a commanding second-place position with more than 25 percent of the soft-drink market.

Furthermore, PepsiCo has other businesses which add to its bottom line. In its restaurant division, a new low-priced menu at Taco Bell, the expansion of home delivery at Pizza Hut and availability of lower-calorie Lite'n'Crispy chicken at KFC are all positives.

There's been an unexpected slowdown in worldwide income lTC from PepsiCo's snack division, which includes Doritos, Ruffles and Lay's, but Prudential Securities analyst George Thompson doesn't believe that is real cause for alarm.

"I recommend purchase of PepsiCo stock because I expect solid growth in its consumer business, whether or not there is a strong economic recovery," concluded Thompson. "The stock is undervalued and that makes it a perfect time to buy this quality blue-chip."

Q. I want to buy my sons 50 shares of Microsoft Corp., sort of as a gag gift in honor of the 10th anniversary of the personal computer. Should I do this now or just wait?

A. Wait for what, the 20th anniversary of the personal computer?

Now's a good time to put your good intentions to work and buy shares of software manufacturer Microsoft Corp. (around $82, over the counter), advised Louis Giglio, analyst with Bear Stearns. He has had a buy recommendation on the stock for some time.

"Microsoft is best at what it does, featuring a strong product line that is getting even stronger with the new DOS 5.0 operating software," said Giglio. "The company will continue to maintain a diverse product line, and I don't think you can go wrong with its stock."

Q. I am a loyal Philip Morris Cos. stockholder. I want to buy more shares. Is it a good time to buy?

A. Philip Morris Cos. (around $72, NYSE) is unable to escape the tobacco stigma even though its food division now provides more than half its profits, noted Marc Cohen, analyst with Sanford Bernstein & Co.

"The success of its tobacco division has allowed the company to make a lot of money and diversify away from tobacco as smoking has declined in the United States," said Cohen. "However, its overseas tobacco sales, particularly in the Orient, have been on the rise and it now controls 10 percent of the Japanese cigarette market."

Cohen recommends purchase of Philip Morris shares because they should outperform the overall market. Revenues have grown along with diversification, and the firm ranks as a giant right behind Exxon and IBM in market capitalization.

Q. My son was left 100 shares of Florida Hillsboro Inc. by my late brother. Are the shares worth anything?

A. Florida Hillsboro Inc., incorporated in Delaware in 1959, changed its name to Kemline Industries Inc. in 1963 and had its offices in Pompano, Fla.

The last market for Kemline shares was in 1965 and it was valued at just a few cents at that time. In January 1966 the company went out of existence due to non-payment of corporate taxes.

Your shares, unfortunately, are worthless, according to Robert Fisher of the New York-based C.M. Smythe & Co. stock-search firm.

Q. I am an independent contractor and offer legal research to mid-sized law firms. I need to hire someone to work a couple of hours for $5 an hour to help with filing. How do I handle this expense?

A. As an independent contractor, the Internal Revenue Service considers you in your own trade or business, said James Schlesser, tax partner with Deloitte & Touche.

"As a result of your business, any expense that's ordinary and necessary in the conduct of business is deductible," explained Schlesser. "You list this expense as one of the components of IRS Schedule C, which you must file as an independent `f contractor."

Q. My grandmother died and left me 3,000 shares of International Mobile Machines. I can't find out much about this stock. Is it worth holding?

A. Congratulations. Your inheritance will help make you more upwardly mobile.

International Mobile Machines (around $7.50, OTC) is involved in development and commercialization of the Ultraphone, a digital radio telephone system. The Ultraphone is designed to provide cost-effective telephone service in areas where the cost of installing, upgrading and maintaining wire line telephone service too high.

After several years of losses, International Mobile Machines has been profitable for the first half of this year, noted Richard Wholey of Chicago-based Wayne Hummer & Co.

"While the stock is speculative, it has good potential for big gains," said Wholey. "Hold as many of its shares as is prudent for your individual financial situation."

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