Bottled up by giant competitors, Coors stock is coming up empty

Answering the Mail

February 12, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. I'm always hearing about the other big brewers, but not much about Adolph Coors.

I own 35 shares and want to know where my investment stands.

A. This company is a spunky chimp locked in a brutal battle with two powerful gorillas.

Sell your shares of Adolph Coors Co. (Class B, around $21 a share, over the counter), the nation's third-largest brewer with a 13 percent market share, for it's becoming increasingly difficult to compete against the giant brewers, said George Thompson, analyst with Prudential Securities.

It takes an enormous amount of advertising money to go head-to-head with Anheuser-Busch Cos., which holds 44 percent of the market, and Miller Brewing, with 22 percent.

Coors --because of its size -- isn't doing the kind of promotional spending necessary to keep pace, Thompson believes.

"Those other companies have the dollars to develop and market new product lines in a business in which it's necessary to 'reinvent yourself' once in a while," explained Thompson. "Coors earnings are difficult to forecast when you look down the road at this tough competition."

Q. Everyone is talking health care these days. Should I start by buying some shares of Baxter International? It seems to be a good company.

A. Buy shares of Baxter International (around $38, New York Stock Exchange), the medical and hospital-supply firm, because its successful 1990 reorganization provided it with considerable cost savings and improved earnings, said Mariola Haggar, analyst with Kemper Securities.

Baxter's earnings growth rate and margins are benefiting, and it continues to thrive with a diverse product line.

For example, sales are currently being fueled by its division that offers home drug delivery, and its revamped hospital division has also helped considerably.

"I like Baxter's long-term outlook," Haggar said. "Its sales mix is gradually shifting from price-sensitive commodities to higher-value products that will improve earnings."

Q. I like to invest in companies whose products I buy.

I am fond of Gillette's razors, especially its Sensor model.

What's your opinion on this stock as an investment?

A. You'll never get into a lather over this stock.

Buy shares of Gillette Co. (around $51, NYSE), the heavily-promoted razor and personal care product firm, because it's one of the fastest-growing companies in the business, said Deepak Raj, analyst with Merrill Lynch.

It has enjoyed strong sales of the immensely popular Sensor razor and blade system, which you mentioned. Just two years after its introduction, Sensor has already captured nearly 15 percent of the razor market.

In addition, there has been considerable growth in demand for Gillette products in less-developed nations, which will undoubtedly be a long-term plus.

"The overall picture is quite positive for Gillette," said Raj, who believes current momentum is sustainable. "When you couple this with the firm's substantial free cash flow, you should be a buyer of its stock."

Q. I just received a nasty letter from the Internal Revenue Service about money which it says I owe from my 1988 return.

It claims that it tried to reach me. What course of action do you recommend?

A. Communicate directly with your local IRS office and ask for a specific analysis of your IRS account that shows the returns and transactions in your tax-paying account, advised James Schlesser, tax partner with Deloitte & Touche.

"Next, request a statement showing any IRS changes made to your original 1988 return," Schlesser added. "With this information, you can figure out if you agree or disagree and can prepare whatever data you need to submit in order to clarify this matter."

Q. I was touted into buying Highland Superstores at $6 and then bought more at $4.

Now that the stock has gone so low, what should I do?

A. Stop while you're behind. Don't buy any more shares of Highland Superstores (around $1.50, OTC), the high-volume retailer of consumer electronics and appliances, and hold existing shares only if you're a speculative long-term investor, advised Sharon Conway, based in Chicago with A.G. Edwards & Sons.

Highland's revenues and earnings have been weak since 1989, despite restructuring efforts. It has pulled out of several markets and now has only 49 stores, in Michigan, Ohio, Indiana and Illinois.

The company is attempting to streamline its work force and operations and become an even lower-cost operator.

Creditors are meeting to review Highland's plans and the company hopes it doesn't have to file for Chapter 11 bankruptcy protection. "Highland has its problems," Conway noted. "Because competition and a slow economy aren't helping the situation, the outcome is uncertain."

Q. I own 500 shares of Stryker. What can you tell me about this company?

A. Stryker Corp. (around $45, OTC) develops and manufactures medical devices, such as orthopedic implants, powered surgical instruments and arthroscopy systems.

Growth of sales and earnings have been phenomenal over the past decade, and double-digit growth is forecast for the next few TTC years, said Richard Wholey of Chicago-based Wayne Hummer & Co.

Stryker has handily outperformed the overall stock market the past few years, as have many medical technology stocks.

"If you have held Stryker for any length of time, you no doubt have a great profit," concluded Wholey. "Consider selling at least a portion of your position to lock in that profit."

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