Price is right but uncertainty lingers for American Express

Answering the mail zHB

September 25, 1991|By Andrew Leckey

Q. I want to buy 20 more shares of American Express Co. Though I haven't been terribly happy with the investment, I think it will be improving. Do you agree?

A.There's potential with this financial services and travel giant, but no assurance that it will be fully realized.

While the price does seem right for American Express (around $26 a share, New York Stock Exchange), some general uncertainty keeps it from meriting a strong "buy" recommendation, said Michael Lewis, analyst with Dean Witter Reynolds Inc.

"I'd like more confirmation that its Shearson Lehman Brothers financial services division has put all its problems behind it," explained Lewis. "In addition, we'll have to wait awhile to receive a stronger indication that the company's travel-related business is on the full path to recovery."

While more Americans are traveling, he noted, they aren't doing so in the numbers they were prior to recession. So, for the time being, he's giving the stock a weak "buy" rating.

Q. My broker has been recommending a stock by the name of PPG Industries. I haven't heard much about the company. What do you think?

A. Expect to see profits through the PPG looking glass.

Stock of PPG Industries (around $55, NYSE), manufacturer of flat glass, paint and chemicals, is an above-average investment with the potential to appreciate 10 percent to 12 percent in price over the next 12 months, said Robert Curran, analyst with Merrill Lynch & Co.

"The two main industries which PPG supplies, namely construction and automobiles, are key in leading the economy out of recession," Curran noted. "Though it doesn't look like there will be a dynamic economic recovery, PPG will nonetheless be a premier beneficiary of all this."

Q. What are your thoughts on Marsh & McLennan, the insurance broker? We admire the way it does business.

A. Pricing in its industry should affect its stock price.

Marsh & McLennan (around $75, NYSE), the world's premier insurance broker, is a good investment because it should benefit once the pricing in the property/casualty market improves, said Michael Smith, analyst with Shearson Lehman Brothers.

The underwriting cycle should be turning upward as the economy's improvement becomes more solid, which could be sooner than manypeople think, he said.

"I'm also seeing good indication that the reinsurance business, in which Marsh & McLennan is a major player, will improve as early as year-end," Smith added. "All of which makes this a good time to buy its stock."

Q. I hope that you will be able to assist my wife with some information on Data-Control Systems Inc., which she bought 20 years ago.

A. What's in a name? In this case, a distinct lack of profits.

Data-Control Systems Inc. changed its name to Engineered Electronics Inc. in 1979 and had offices in Chicago.

Unfortunately, the firm was completely liquidated in 1982, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm. The last market for its stock was back in 1981.

There was no stockholder equity at the time of liquidation and your shares have no value.

Q. I have been waiting forever for my Internal Revenue Service refund check and just received notice that the IRS disagrees with me about what I owe. What is the proper way to handle this? Is there any hope in arguing with the IRS? If I have to pay interest, can I do so a little bit at a time?

A. The IRS will permit the taxpayer to indicate, in a letter, why he disagrees with the proposed changes, said James Schlesser, tax partner with Deloitte & Touche.

"If there is indeed an error on your part and the IRS is correct, interest will be assessed on the amount owed from April 15 to the date paid," explained Schlesser. "In addition, the IRS expects you to pay interest and principal in full upon notification."

Q. We have owned 100 shares of Intel for a little over four years. We have never received any dividends during the entire time. Do you think we should continue to hold?

A. A lack of dividend doesn't necessarily indicate problems.

It's true that Intel Corp. (around $50, over the counter) doesn't pay dividends, but it instead plows earnings back into its business in order to maintain its worldwide leadership in the semiconductor industry.

"If your situation requires dividend income, then Intel isn't appropriate for you," pointed out Richard Wholey of Chicago-based WayneHummer & Co. "However, if you can forego current income in anticipation of significant growth, you should hold on to your Intel shares."

New products and a recovery in the computer industry bode well for Intel over the next few years, Wholey predicted.

Q. We own 80 shares of Carpenter Technology Corp. and would appreciate your opinion on whether to hold or sell these shares.

A. If you're a patient investor, hold your shares of Carpenter Technology (around $52, NYSE), a producer of stainless specialty steels and alloys, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

The company sells its products to transport, electronic, electric, machinery, aerospace and metal fabricators. Earnings per share have been down due to lower sales, the effects of recession and a special plant closing charge.

"Until a sustained economic recovery is evident, market conditions for Carpenter Technology could be soft," concluded Conway. "However, the longer-term outlook should be aided by stronger demand, a better product mix and firm pricing."

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

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.