Investment in U.S. Surgical stock should operate to buyer's benefit

Answering the mail

January 29, 1992|By Andrew Leckey

Q. My best friend bought 100 shares of U.S. Surgical several years ago and has more than tripled his money. I want to get in on the action. Is it too late?

A. The best may be yet to come.

While many investors have already received phenomenal returns from U.S. Surgical Corp. (around $132 a share, New York Stock Exchange), this maker of surgical stapling and medical devices has only scratched the surface of potential product demand, said Kurt Kruger, analyst with Hambrecht & Quist Inc.

Earnings rose 98 percent in 1991. Kruger predicts U.S. Surgical stock will double in price in 1992.

"I have a 'screaming buy' recommendation on U.S. Surgical," he said. "Its laproscopic instruments used on gall bladder operations, reducing pain and recovery time for the patient, are a major medical advance." Revenues should grow to $2 billion long-term as such methods are used in more surgical procedures and gain worldwide acceptance, he concluded.

Q. My financial adviser recommended buying some shares of Royal Dutch for a blue chip investment. I want to confer with you because I was under the impression that oil companies aren't doing so well. What are your thoughts?

A. Royal Dutch Petroleum (around $82, NYSE) is a giant with room to grow, especially in its crude oil and natural gas divisions, said Stephen Smith, analyst with Bear, Stearns & Co.

This company is not merely an oil company but the world's largest oil company and one of the most profitable. It has provided 15 years of superior total return for investors vs. other companies in its industry. A company with revenues of $107 billion, Royal Dutch features a conservative balance sheet and diversification throughout 50 countries, said Smith.

"Royal Dutch has excellent management, research and development efforts and superb growth potential," he said. "It sticks with what it knows best and keeps a large cash reserve available for nabbing any potential drilling rights which might appear."

Q. I have owned stock in Gap Inc. since way back when and have been buying more and more. Do you think I should continue?

A. There's been no gap in profits.

Keep buying shares of Gap Inc. (around $57, NYSE), the popular apparel and accessory stores, because this firm has consistently provided quality for both shoppers and investors, said Donald Trott, analyst with Dean Witter Reynolds Inc.

It will be able to continue serving its growing customer base with fine basic apparel which isn't overly trendy, he said. With sales of more than $1 billion and profits of $179 million, it can keep opening new Gap and GapKids stores.

"Gap Inc. has found a niche for itself with its price points and its mix-and-match accessory clothing," said Trott. "It is also known everywhere for its smart advertising campaigns."

Q. I have 3,000 shares of Clinton Oil. The company used to trade over the counter but now is no longer listed. Does it still exist?

A. You'll need a road map to trace this one.

Clinton Oil Co. was a Delaware corporation that in 1969 changed each common share, valued at 10 cents, to a value of 3 1/3 cents and gave two additional shares for each share held.

Then, the company's name was changed in 1976 to Energy Reserves Group Inc., which in 1985 was merged into Broken Hill Proprietary Co.

That basically is why Clinton Oil is no longer listed in the over-the-counter market, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

At the time of merger, shareholders of record received $6.10 for each share of common stock of Energy Reserves Group. Broken Hill Proprietary Co. is an Australian entity, and you must make efforts to contact it there, or you can ask R.M. Smythe for assistance in determining whether you're on its shareholder list.

Q. My wife and I just received a refund check from our bank for overpayment on our adjustable-rate mortgage. I am told that I must claim this on my tax return. Is this correct?

A. Though this is a mistake by the bank, you must claim it on your income tax return because that check is really interest that you deducted on prior tax returns, said Robert Greisman, tax partner with Grant Thornton.

Either the bank will send you an IRS 1099 form at the end of the year on which you must list the amount noted on the income portion of your return, or the bank will automatically take care of it for you with the forms it sent to you and the IRS. Talk to your banker to make sure which steps are being taken, Greisman stressed.

"You are definitely not alone," he said. "After bank audits, a lot of banking and savings institutions have realized there are miscalculations in the amount of interest a client should be paying."

Q. I have been considering purchasing stock in Woodhead Industries. Prior history indicated good growth for the company. What do you think?

A. Woodhead Industries (around $17, over the counter) is a company with a solid future and a good choice for aggressive long-term investors, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

It makes a variety of specialty electrical devices and motion-control products for industrial use. These include portable headlamps, wiring devices, circuit-testers and portable power distribution equipment. Earnings per share were down significantly in the last fiscal year because of a one-time charge for litigation costs, the weak economy, higher interest charges and research and development expenses. There was, however, a modest sales gain.

Its quarterly income is expected be 15 percent higher than in the year-ago quarter, Conway said, thanks to research that has strengthened its product lines. "Woodhead management appears to be on track," he said. "Although there have been problems, solutions have been reached without too much damage to the bottom line."

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