Curb your appetite for Heinz stock, but earnings should perk up by 1993

Answering the Mail

February 26, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. I've always been pleased with my blue-chip investment in H.J. Heinz, but lately I'm hearing negative rumblings about earnings prospects. I'd appreciate your opinion.

A. Earnings of this famous ketchup maker remain stuck in the bottle.

Hold, but don't buy more shares of H.J. Heinz Co. (around $40 a share, New York Stock Exchange) for profits will likely be down next quarter and flat for several additional quarters, predicted Roger Spencer, analyst with PaineWebber Inc.

While it retains its image with ketchup, tuna and cat food products and its Weight Watchers programs, the company is in transition. It is spending heavily on marketing and advertising to increase volume growth, at the same time spending on plant modernization.

"Heinz remains a good company that is investing heavily in its future," added Mr. Spencer. "It will create a nice earnings base for shareholders in 1993 because these expensive capital expenditures should pay off at that time."

Q. We own several hundred shares of Homestake Mining and are uncertain whether to buy more. Gold doesn't seem to be moving up the way it used to move. What should we do with this investment?

A. It's difficult to polish up this investment.

Homestake Mining Co. (around $16, NYSE), the gold, uranium, lead, zinc and silver mining firm, rates only a "weak" hold recommendation primarily because gold has lost its glitter, said Clarence Morrison, analyst with Prudential Securities.

Gold stocks are fully valued, in part because of expectations that Russia will create a gold-backed Russian ruble bond. That might not happen, Mr. Morrison believes, and even if it does it might be a long way off.

"Gold is no longer a safe haven, hedge or even a beneficiary of the flight of capital on the international scene," said Mr. Morrison. "It doesn't have the value it once did and is primarily used for commercial and industrial purposes."

At the same time, gold production is at the highest level ever.

There is also the risk, Mr. Morrison contends, that the International Monetary Fund might dump gold onto the market because most currencies are under control and the East and West are at peace.

Q. My family and I are reviewing our small stock portfolio and want to know your opinion of Dun & Bradstreet. We bought it because of its dividend history and want to know if anything has really changed with it.

A. Hold shares of Dun & Bradstreet (around $56, NYSE), publisher of business information, with a near-term price goal of around $65, said Michael Kipinski, analyst with A.G. Edwards & Sons Inc.

Earnings have been rebounding and are on target with expectations, with the hope of even better performance once the economy regains strength.

"Dun & Bradstreet is somewhat economically sensitive globally, its prospects dependent on the world's economies," added Mr. Kipinski. "But direct marketers and advertisers are major clients that should be showing improvement."

Q. My father passed away several years ago and I just came across a stock certificate for a Siboney Corp. Although I'm reasonably confident that this stock is worthless, can you confirm my suspicions?

A. You'll be pleasantly surprised to learn that Siboney Corp. is still in existence.

Incorporated in 1955, Siboney is currently traded over the counter, said Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm. Its trading range is 1 1/2 cents bid and 4 cents offer.

You can contact the company at 168 Meranec, P.O. Box 16184, Clayton, Mo. 63105.

Q. My husband and I started our own restaurant business and our accountant mentioned forming an S corporation. Can you help us with information about the advantages and disadvantages of this step?

A. An S corporation is an entity that pays no federal income tax, with all income or losses flowing through to its shareholders and reported on their federal income tax returns, explained Barbara Pope, tax partner with Price Waterhouse.

This permits the owner to obtain a tax benefit for losses and avoids the double layer of tax to which corporate dividends are subject.

"One negative factor is that the S corporation cannot deduct life and health insurance premiums for shareholders that own 2 percent or more of the company stock," said Pope. "Twenty-five percent of the health care premium can be deducted on the shareholder's own tax return."

Q. I bought Sun Microsystems. Should I hold it or sell it? What's the long-term outlook?

A. Sun Microsystems (around $32, OTC), leading supplier of computer networks and work stations, has prospered the past few years despite tough competition.

The firm's UNIX-based open systems have won a large and loyal following, and, as the economy recovers, Sun should see improvement in sales and earnings.

"Continue to hold your Sun Microsystems shares for excellent growth potential," advised Richard Wholey of Chicago-based Wayne Hummer & Co.

Q. We hold 200 shares of Interpharm Labs and have watched this stock really move up. Do you think this will continue? Should we buy more?

A. Don't buy more shares of Interpharm Laboratories (around $43, OTC) because biotech stocks have been under selling pressure due to their amazing success last year, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

Interpharm is an Israeli company engaged in research and development, production and marketing of biotech products for the health care industry. Products include human growth hormone, human beta interferon and monoclonal antibodies. Sales and earnings have made dramatic gains.

"Interpharm is profitable and that's a real plus, but I would wait until the biotech correctional phase runs its course before buying any more shares," said Mr. Conway.

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