Once-embattled Wendy's changes recipe, cooks up success

December 11, 1991|By Andrew Leckey

Q. What are your thoughts on my 250 shares of Wendy's International? I am a long-term shareholder reassessing my investment.

A.This stock rates as a Dave's Deluxe. Success in using founder Dave Thomas in its commercials is just one example of this once-embattled fast-food chain's smart recent moves.

Hold your shares of Wendy's International (around $9 a share, New York Stock Exchange), since, after all, you've weathered the worst of times if you've held since back in 1986 when the company was awash in red ink, said Joseph Buckley, analyst with Bear, Stearns & Co.

The company's income has gradually increased since that time, even though it has not reached the peak levels of the early 1980s. Consumer awareness of Wendy's advertising has risen from 56 percent to more than 75 percent in the past several years. Creation two years ago of its Valu Menu, offering seven items for less than $1, has also increased customer traffic in its restaurants. Another positive step is its program to reduce the turnover rate among its restaurant managers, which is proving to be effective.

"Thanks to increased earnings, Wendy's International plans on expanding, and its new restaurants will be much more efficient," said Buckley. "You should continue to watch how the company's expansion program is doing, but I'd personally say that 'so far, so good.'"

Q. I am thinking about investing in the health-care industry. My broker says this is a hot area and mentioned Johnson & Johnson. What do you think of this as a potential investment?

A. Right industry, but perhaps the wrong stock.

Though considered a growth stock, Johnson & Johnson (around $96, NYSE) really isn't doing much at this time, said David Lothson, analyst with PaineWebber Inc.

The introduction on the non-prescription market of its Monistat-7 prescription product to cure vaginal yeast infections has been well-received. It has a number of other new products that are good candidates for the over-the-counter market as well. Unfortunately, such inroads in the non-prescription market afford smaller profit margins than the prescription business does.

"Johnson & Johnson is introducing more surgical products and continues to market its products overseas, yet the overall effect is minimal," said Lothson, who is neutral on the stock during this stagnant period. "The timing is right for the health-care sector, but I think you can obtain better return, growth and earnings from a stock such as Abbott Laboratories."

Q. I keep reading a lot about Alltel Corp. and want to invest in its stock. I don't have much money and therefore must be careful before I buy anything. Can you help?

A. Unfortunately, all's been told about this stock. Its stock is pricy as a result of so much good news being circulated.

This is a time when investors should be selling shares of Alltel Corp. (around $36, NYSE), the telecommunications and data processing services firm, to take their profits, said James McCabe, analyst with Nomura Securities.

All the positive information just can't be hidden: Alltel's cellular business, though small, is growing like gangbusters and providing capital to diversify into other arenas. The firm is not only in the local telephone business, but in manufacturing, computer services and long-distance services. Its computer division provides more than 10 percent of its earnings.

Said McCabe: "I believe that other telephone carriers offer a much better bargain."

Q. I am seeking any and all information on the Red Lodge Canning Co. of Montana. I recently found an old stock certificate dated 1939 and was hoping it would be worth something.

A. Your certificates, unfortunately, are worthless.

The Red Lodge Canning Co., actually a Delaware corporation which began doing business in Montana in the 1930s, had its license to do business revoked in 1982. It had already gone out of business, according to Robert Fisher, vice president with the R.M. Smythe & Co. stock-search firm.

Q. I am a disabled person who recently qualified for a subsidy to help pay my utilities bill. I don't know if I should note this monthly money on my tax return. Does it even affect my taxes?

A. Your utility subsidies, which are usually offered by a federal or state agency, are treated as relief payments and not included in calculation of your gross income on your federal tax return, said Barbara Pope, tax partner with Price Waterhouse.

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