Investing in Frederick's of Hollywood hardly a risque prospect

Answering the mail nFB

October 16, 1991|By Andrew Leckey

Q. The stock of Frederick's of Hollywood has been suggested to me. Is it too late to buy?

A. As a serious investment, this famous lingerie retailer isn't risque at all.

Frederick's of Hollywood (around $9 a share, New York Stock Exchange), which also sells dresses and sportswear at 178 stores, is a stock primarily for aggressive investors confident about economic recovery and a strong Christmas season, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

Its mail order business continues to be profitable and it has initiated a pilot concept with its eight "Private Moment" designer stores in California. Earnings are up on higher sales volume and a favorable product mix.

"Retail is a volatile business, especially in recession, but Frederick's of Hollywood has a unique merchandise niche and does a fine job of advertising and promotion," explained Conway.

Q .I have seen my 35 shares of Browning-Ferris Industries plummet. I really don't know what to do. Do you recommend selling?

A. This stock has fallen into the Dumpster.

Sell your shares of Browning-Ferris Industries (around $19, NYSE), the solid and liquid waste management services firm, because the company has a lot of problems to deal with, said Vishnu Swarup, analyst with Prudential Securities.

The stock price fell on news that earnings would be lower than expected and that recycling efforts had cut significantly into its earnings. Management's sale of big portions of Browning-Ferris stock hasn't helped, Swarup said.

"Until I see stronger management control, I'll keep my recommendation as a sell on Browning-Ferris," said Swarup. "Making matters worse, Browning-Ferris, along with another waste firm, is under investigation for price-fixing in its hauling business."

Q. My wife and I own shares of Merck & Co. and like the success of the company. However, we're getting nervous about all the news about price control. Should we hang in there or sell?

A. At this time, discussions about price control for pharmaceuticals are just that, and there is no near-term reason for concern on that particular issue, said Steve Buerman, analyst with Merrill Lynch & Co.

"The real issues facing drug companies are patent expirations and new product launchings, and Merck [around $130, NYSE] is in good shape on both counts," said Buerman, who recommends holding or buying the company's shares.

On the other hand, some less fortunate competitors in the drug industry with strained earnings from expired drug patents may be forced into mergers or consolidations.

Q. What are your thoughts on Ralston Purina? Do you consider it to be an exciting investment?

A. Exciting really isn't the word for Ralston Purina (around $48, NYSE), a food and pet food company whose stock is reasonably priced at this time, said Steve Carnes, analyst with Piper Jaffray.

The company is the world's largest producer of dry dog and cat foods, and heavy promotional activity by rival Quaker Oats and pressure from regional and private label producers has cut into profit margins. In addition, profits from its Continental Baking subsidiary are suffering from weak bread and snack cake sales. Perhaps the brightest spot is its Eveready battery business, which is achieving strong gains.

"Ralston Purina is neither a shining star nor a bargain, and we're not pushing its stock very hard," said Carnes. "We look for earnings per share to increase for fiscal 1992, but the stock isn't likely to outperform the market."

Q. I own shares of Good Humor Co. of California, dated 1961. Can you give me the status of the company?

A. Good Humor Co. of California, not to be confused with several other businesses which still bear the Good Humor name, changed its name to Allstate Industries Inc. in 1967, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

It also recapitalized at that time through a one-for-10 reverse split. In 1972, however, the company's California charter was suspended and it went out of business. Your shares, unfortunately, no longer have any value.

Q. How are lump distributions taxed, if at all, on annuities for a person 69 years of age, such as myself?

A. Annuities become taxable vehicles when distributions are received, whether lump sum or otherwise and regardless of the individual's age, said James Schlesser, tax partner with Deloitte & Touche. The tax rate on annuities distributions is the difference between what you receive and the cost of your original investment, he added. The gain is taxed as ordinary income.

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.