Strong sales, earnings make Kellogg a great buy

Answering the mail

November 06, 1991|By Andrew Leckey

Q. I bought Kellogg Co. about two years ago when the price was dipping and I've been very happy with it. Is it time to buy more shares?

A. You may be making the right move once again. It was smart to buy shares of cereal giant Kellogg Co. (around $103 a share, New York Stock Exchange) when it had a down year in 1989, for it's a premier company which has since roared back with solid earnings, said Roger Spencer, analyst with PaineWebber Inc.

"Since 1989, Kellogg has been building momentum and is a highly attractive investment to be buying," said Spencer. "Its strong sales volume here and internationally is impressive, and earnings, which are up this year vs. last year, should rise 14 percent next year."

Q. My late husband left me with 500 shares of Tucker Corp., purchased in 1947. Is this stock of any value, or worthless?

A. That rare stock hasn't totally run out of gas. Tucker Corp. shares are worthless as investments, but the certificates have some value as collectibles.

That failed manufacturer of an innovative rear-engine car, despite its financial shortcomings, did provide an interesting story line for the Francis Ford Coppola film "Tucker: A Man and His Dream," which starred Jeff Bridges.

Tucker Corp., a Delaware corporation headquartered in Chicago, quickly fell on hard times and went bankrupt in 1949. Its corporate charter was forfeited in early 1952, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

"If your certificates for 500 shares are originals and have been maintained in good condition, they are worth about $50 per certificate at retail," said Fisher. "I would recommend that you have a professional examine them for a true appraisal."

Q. Is there any hope for small specialty retailers such as Pier 1 Imports, when even the big companies aren't making any money? Should I stay away from this stock?

A. This firm could decorate your stock portfolio.

Pier 1 Imports (around $9, NYSE), the import specialty stores, is one of the few retailers to post good earnings in the current dismal economic environment, said Dennis Telzrow, analyst with Eppler, Guerin & Turner Inc. Furthermore, he believes the company's earnings will be even better once the economic picture improves.

"I highly recommend shares of Pier 1, for it is attractively priced in light of its earnings potential," said Telzrow, who says this is not a company that disappoints investors very often. "The company remains methodical in its site openings, and its buyers continue to stock its stores with unique import items at reasonable prices."

Q. I found some old stock certificates that I had appraised at $4,000 as collectibles, but worthless as investments. Do I have to claim this money on my return?

A. The $4,000 must be reported as income, to the extent it exceeds the price on the date of purchase or date you inherited them, said Barbara Pope, tax partner with Price Waterhouse.

"You should be able to offset that cost basis and not pay the full income amount on the $4,000," explained Pope. "It is FTC conceivable that you have a loss, but it may be difficult to prove it if you don't have good records about the certificates and their original value."

Q. In searching for high-yielding alternatives to certificates of deposit, I've come across a stock called Global Yield Fund on the New York Stock Exchange. The dividend looks good. What can you tell me about it?

A. Global Yield Fund (around $8, NYSE), a closed-end mutual fund investing in non-U.S. debt securities, looks like a good investment, said Richard Wholey of Chicago-based Wayne Hummer & Co.

The majority of its assets are in foreign government obligations with maturities of less than three years, its goal that of beating the yields of U.S. debt instruments.

"The 9 percent rate of return on this fund's dividend is attractive and seems to more than adequately compensate for the small amount of currency risk," said Wholey, who believes the high quality and short-term nature of the fund means little default or interest-rate risk. "Go ahead and purchase some shares."

Q. I was advised that Moore Medical Corp. was a good buy. I'd appreciate your opinion on the stock.

A. Don't buy until better results are achieved by Moore Medical Corp. (around $5, American Stock Exchange), national distributor of brand-name and generic pharmaceuticals, medical supplies and surgical supplies, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

The company has been battling to improve sales and earnings by boosting selling prices and announcing layoffs, but it's too early to tell how all this will offset anticipated lower sales. A recent proxy fight against management was unsuccessful.

"Moore Medical has been disappointing so far this year, and I'd hold off buying until we see some improvement," said Conway.

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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