Club Med stock may take off as vacationers come out of hiding

Answering the mail

October 02, 1991|By Andrew Leckey

Q. Nobody seems to be doing much of anything these days, especially traveling. What do you think about my 100 shares of Club Med? How well will the company do?

A.The itch to travel may be returning. Stock of Club Med Inc. (around $22 a share, New York Stock Exchange) should outperform the overall market as many more people, especially Americans, look to travel again, said Carolyn Levy, analyst with Shearson Lehman Brothers.

Caribbean and Mexican locations in particular are expected to benefit. Club Med's international scope provides some economic stability, since it operates 25 resorts around the globe and a 425-passenger cruise ship. Although Club Med's U.S. business hasn't been growing much since the mid-1980s, it is working hard to do something about it.

"Club Med has revamped its marketing approach, including the hiring of a new advertising agency, to lure more families," explained Levy. "Families spend more than singles."

Q. I am interested in starting my small portfolio with shares of high quality investments that I can keep awhile. I was considering buying 25 shares of Sara Lee. What do you think about this?

A. The end of recession will simply be icing on the cake.

Sara Lee Corp. (around $44, NYSE), famous food processor and maker of consumer products, is a quality company with quality products and its stock is worth buying, said Nomi Ghez, analyst with Goldman Sachs Inc.

"The reason I like Sara Lee so much, especially right now, is the company's ability to maintain double-digit growth figures even in a slow-growth economic period," said Ghez. "I anticipate solid growth figures for the company in all aspects of its business."

Q. My husband and I own 50 shares of Gulfco Investment Group Inc. We haven't followed this investment for some time and aren't even sure of its

correct name. Can you help out?

A. This company's history features several twists.

Gulfco Investment Group Inc., a Louisiana corporation, had a 20-for-1 reverse split in 1969. It changed its name to Gulfco Investment Inc. in 1975. The company was merged into Independent Insurance Group Inc., each common share of Gulfco exchanged for $40 in cash, in 1983.

To find out whether you're entitled to the $40 cash exchange, you must provide the company with your name and stock certificate number. Contact Gail Scandridge, Shareholder Relations, Independent Insurance Group Inc., P.O. Box 157, Marksville, La. 71351.

Q. I have been receiving interest checks twice a year from my HH bonds, but don't earn enough to pay income tax. I am interested in cashing in some of these bonds. I hope I don't have to pay income taxes, since I haven't in so many years. I am 79 years old.

A. Whether you pay taxes in a given year is based upon the income earned for that particular year, said Robert Greisman, tax partner with Grant Thornton.

"Basically, if the income you earn from selling those bonds, plus any other earned income for that year, exceeds the cap for your age bracket, you must pay income taxes," he said.

Q. I own 4,000 shares of Homestake Mining. What do you think are its prospects?

A. There's not much glitter right now.

Homestake Mining (around $15, NYSE), the country's biggest gold producer, doesn't have great immediate prospects primarily because gold is at its lowest level in several years, said Richard Wholey of Chicago-based Wayne Hummer & Co. However, longer term, any meaningful upturn in the price of gold would translate into higher earnings and a higher stock price for the company, he added.

Said Wholey, "I'd suggest holding on and waiting for the inevitable rebound in the price of gold at some point."

Q. I own a few shares of Freeport Minerals. What is your opinion of that stock?

A. Freeport-McMoRan (around $38, NYSE) was created in 1981 by the exchange offers for the shares of Freeport Minerals and McMoRan Oil & Gas.

Since that time, it has spun off Freeport McMoRan Resource Partners, Freeport McMoRan Energy Partners, Freeport McMoRan Copper and Gold, Freeport McMoRan Gold (subsequently sold to Minorco) and Freeport McMoRan Australia Ltd.

The parent company is a major phosphate fertilizer company, but has oil, gas, copper and gold interests as well. Prices for most of its commodities have been low, but copper and gold production has been gaining in volume, and financial restructuring is in the works to improve the firm's debt levels.

"Freeport-McMoRan is paying a dividend equal to nearly 6.5 percent and the financial restructuring should assure its continuance," said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc. "But while the changes being made could make the company more attractive, its shares are most suitable for speculative investors at this time because it is so dependent on commodity prices."

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

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