Problems deep in the heart of Texas cause concern for TI stocks

Answering the mail

October 23, 1991|By Andrew Leckey

Q. We own 100 shares of Texas Instruments. This investment hasn't been all we'd expected. Should we hold on or move on?

A. There are still problems deep in the heart of Texas as far as this stock is concerned, but there's no reason to get out just yet.

Hold your shares of Texas Instruments (around $30, NYSE), the famous semiconductor and electronic equipment firm, even though the company will lose money this year and probably just do OK next year, said Wendy Abramowitz, analyst with Argus Research Corp.

Texas Instruments has had its share of bad fortune, most of which it brought upon itself. The company has a worrisome knack of inventing products and not being able to hold on to them by utilizing the proper marketing, sales and management techniques.

"Texas Instruments also doesn't have a proven capacity to cut its costs, although it has done well with its royalties on various products," said Abramowitz, who expects the firm will have to rely heavily on its operating revenues. "The problem is that I don't see next year being a good year for semiconductors, so I suggest you hold your shares until the picture improves."

Q. My investment club has decided to buy shares of Reynolds Metals because of the improving economic picture. However, I'm not so sure.

A. You joined the right club. It makes good sense to buy shares of Reynolds Metals (around $55 a share, New York Stock Exchange), the aluminum products company, so long as you personally believe that the economy is gradually improving, said Clarence Morrison, analyst with Prudential Securities.

Reynolds has a tremendous buildup in inventory, which should peak later this year and then decline next year. A slow but consistent upturn in production cycles in the United States and greater consumer consumption will help the Reynolds consumer products division, which boasts strong consumer loyalty.

"Now is the time to be buying Reynolds shares, so you can get in before this stock's momentum really accelerates next year," advised Morrison.

Q. What's your outlook for my 50 shares of Winn-Dixie Stores?

A. Winn-Dixie Stores (around $37, NYSE), well known in the South for its food supermarkets, should only be an average stock market performer as the economy improves, said Ed Comeau, analyst with Oppenheimer & Co.

The premier grocer in its region, Winn-Dixie was unscathed by competition until the 1980s. Its goal has always been to stick with its core grocery business and offer good prices. However, ++ more and more grocery stores have entered the southern market, including so-called "super stores" with highly discounted prices. That definitely adds competition and puts stress on the bottom line.

"One real plus with this stock is its strong dividend record, increasing its dividend for 46 years and inspiring a loyal shareholder base," said Comeau. "Yet Winn-Dixie is unlikely to be one of the stellar performers in its industry, but instead just maintaining the status quo."

Q. My family started a small trust fund for me years ago and now I wish to sell some of this old stock. How can I determine my capital gains? Do I look at the date my family gave me the stock or the date on which they acquired the stock?

A. The holding period for stock received as gifts goes all the way back to when the donor acquired the stock, said Barbara Pope, tax partner with Price Waterhouse.

However, if any gift tax was paid at the time the gift was given by the donor, you may be able to add that on to the cost basis and thereby reduce the amount of gain, she added.

"Basically, to determine your gain or loss, you take the price at the time of origination of the donor, add the applicable gift tax, if any, and subtract this amount from the selling price," Pope explained.

Q. I recently purchased a few hundred shares of VLSI Technology. Should I hold on or take my profit?

A. Congratulations on your gains. But don't take the money and run just yet.

Hold your shares of VLSI Technology (around $7, over the counter), manufacturer of software design tools and customized integrated circuits, because more gains appear to be ahead, said Richard Wholey of Chicago-based Wayne Hummer & Co.

Strong sales of well-received products and new product introductions have set the stage for strong earnings growth. The ride may be bumpy, but the next few years should be good for the firm and its stockholders, Wholey believes.

"Although you have a nice percentage gain already, there's more to come," said Wholey. "Continue to hold."

Q. I won a small amount of common stock in Public Service of New Hampshire. Will this utility recover? Should I hold?

A. Because of considerable uncertainty and your small number of shares, sell your holdings as soon as possible, advised Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

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