Investment in Caterpillar should make earth move with little risk eventually

Answering the mail

January 22, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. I am not sure the economy will turn around fast enough for me to recoup my investment in Caterpillar Inc. What do you think fTC I should do with these shares?

A. Don't worry. The earth eventually will move for this giant

company.

Hold your shares of Caterpillar Inc. (around $43 a share, New York Stock Exchange), maker of construction, farm and mining equipment, because there's little risk involved, said Steve Colbert, analyst with Prudential Securities.

The company and its stock have taken their lumps, based on a sales slump and loss in earnings. Problems are tied to weaknesses in various markets around the globe, and the stock will need some time near-term because the construction outlook remains dismal.

"Caterpillar has had a long-term cost-cutting and efficiency plan since the 1980s, which, while it has a ways to go, is on the right track," explained Mr. Colbert. "Don't expect rapid improvement, but hang on until the world's economies heal."

Q. I bought Sears, Roebuck & Co. stock not so long ago, thinking it'd turn around and I'd have a good investment. I don't know whether to hold on or try something else.

A. Hold shares of Sears, Roebuck (around $40, NYSE), the nation's third-largest retailer, but don't expect any "buy" recommendation until there's more reason for confidence about earnings, said Wayne Hood, analyst with Prudential Securities.

"Recent news of further cost-cutting in the catalog division and customer service operations is quite positive, at least from an investment viewpoint," said Mr. Hood. "It puts Sears more in line with its competitors."

In addition, duties of Chairman Edward Brennan were recently split to focus more of his attention on the troubled merchandise group. Wait to see how Sears fares as the economy improves and the company continues to make changes, Mr. Hood counseled.

Q. I am 34 years old and just starting a stock portfolio. General Mills has been recommended to me. What's your opinion on its stock?

A. It offers a bowlful of opportunity.

General Mills (around $71, NYSE), famous in foods, restaurants and apparel, is a safe investment bet in a firm that has enjoyed a consistent 15 percent growth rate, said Nomi Ghez, analyst with Goldman Sachs. Its fast-growing restaurant chains, Olive Garden and Red Lobster, should keep its track record strong, Ms. Ghez predicted.

General Mills has reported solid sales even during weak economic times and now has sales of more than $7 billion.

"The company is well-run and continues to revamp its older product line with new marketing campaigns, gimmicks and new tastes," said Ms. Ghez.

Q. In 1980 I bought 600 shares of Troy Gold Industries Ltd. At one time the company was listed on the over-the-counter market, but I haven't found it lately. Does it exist? Do my shares have any value?

A. No golden prospects here. Troy Gold Industries of Sacramento, Calif., is no longer in business and hasn't been reporting financial results since 1979.

The company was in the gold-mining business, with about 25 claims in the Morning Glory mines, as well as development plans in other regions, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

"None of Troy Gold's efforts came to fruition," said Mr. Fisher. "Your shares have no value."

Q. My wife and I own some rural land that we don't use. We want to donate some of it to our local church for a playground. What type of tax deduction can we take on this donation?

A. You can take a tax deduction for the fair market value, so long as the church is a qualified charity, said Robert Greisman, tax partner with Grant Thornton.

The Internal Revenue Service requires a qualified appraisal of the land, done by someone who is independent of the transaction, he added. An IRS form must be attached to your tax return after the appraisal and transaction are completed.

"You can't take a deduction for any more than 30 percent of your adjusted gross income in any given year," concluded Mr. Greisman. "Depending on the appraised fair market value, you may not be able to deduct the full value on your tax return, but you will be able to carry the balance over for use in future years."

Q. I hold a stock called Gtech Corp. It was listed on the over-the-counter market and I want to know what happened to it.

A. Gtech Corp. was acquired in February 1990 by Gtech Holdings, a concern formed by Donaldson, Lufkin & Jenrette Securities Corp. and some Gtech Corp. managers. In the transaction, each share not already owned by Gtech Holdings was converted into the right to receive $16.625 per share in cash.

"It's possible the merger partners will still pay you, but if not, there's an over-the-counter market-maker which will give you somewhat less," said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc. "Check with your broker."

Since information was likely sent to you by the company, this points out the importance of keeping your address up-to-date with a company's transfer agent.

Q. I see Amgen's stock price increasing almost every day and am tempted to buy. Is there still significant upside left in this highly publicized stock?

A. Amgen (around $76, over the counter), unlike many other biotech companies, actually has two products in the marketplace and a number of others in various stages of approval. Potential for its products is excellent and the reason behind the spectacular performance of the stock in 1991.

"Amgen's high share price appears to more than adequately reflect the company's excellent growth potential," said Richard Wholey of Chicago-based Wayne Hummer & Co. "Wait for some of the excessive enthusiasm for Amgen to fade and the stock price to correct before buying shares."

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