Buy more Coca-Cola stock it's a company on the move

Answering the Mail

April 15, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. I have owned shares of Coca-Cola Co. since I inherited them from my grandfather. I've always been pleased with this investment. Do you think it will continue to do well? Should I buy more shares?

A. As an investment, Coke is it.

Buy more shares of Coca-Cola Co. (around $81 a share, New York Stock Exchange) because it is one of the few long-term growth companies that generates excess cash and spends it wisely, said George Thompson, analyst with Prudential Securities.

An American institution and the world's largest soft drink company, Coca-Cola isn't standing still. This excellent company offers good immediate returns while continuing to invest in its future, Mr. Thompson pointed out. Heavy spending on marketing in this country and overseas not only maintains but expands its market share.

"Coca-Cola doesn't expect the consumer to come to it, but rather develops good relationships with distributors and overseas franchises," Mr. Thompson explained. "Because the company continues to improve, it is a good stock purchase for anyone."

Q. I invested in Browning-Ferris Industries as a long-term investment, but I understand earnings won't be all that wonderful. Should I get out now?

A. Hold shares of waste disposal firm Browning-Ferris Industries (around $21, NYSE), although other companies in its industry have stronger earnings prospects, said Vishnu Swarup, analyst with Prudential Securities.

Browning-Ferris stock has been beaten down badly by poor earnings prospects tied to continuing problems with landfills, a lack of growth in overall volume and weakness in its European business. Earnings aren't expected to improve until the final quarter of this year, and, even then, will only be flat. Improvement is expected next year.

"Browning-Ferris earnings prospects weakened two years ago due to slow granting of landfill permits in Ohio and California, and it hasn't been able to catch up," said Mr. Swarup. "Furthermore, its large exposure to industrial and commercial waste disposal means that part of its business won't turn around until the economy improves."

Q. I have owned 134 shares of Alltel for some time now. I am getting confusing signals about this stock and would appreciate your opinion on whether to hold or sell.

A. Even though near-term earnings will be flat, hold shares of telecommunications firm Alltel Corp. (around $38, NYSE), said Craig Ellis, analyst with C.J. Lawrence, Morgan Grenfell.

Eighty percent of Alltel's income will be coming from its core local exchange business for a while, and that business isn't doing well. Its stock, therefore, is unlikely to outperform the overall stock market the next six to eight months, Mr. Ellis predicts.

"On the other hand, Alltel has a great business mix which includes cellular operations and information systems and this will get better with time," he added. "Acquisition of Systematics, a data-processing service for financial institutions, will be a big plus once Alltel handles the expense of integrating it into its business."

Q. While going through some old papers recently, I came across certificates purchased in 1971 for 200 shares of Pancoastal Inc. Are they of any value?

A. This company was panned by tax authorities.

Pancoastal Inc., incorporated in Delaware with headquarters in Hartford, Conn., is no longer in existence because it forfeited its charter in 1982 for non-payment of corporate taxes.

There was no equity remaining in the company and your 200 shares have no value, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

Q. I recently purchased a piece of machinery for a super bargain price. The appraised resale value is about $7,000 more than I paid. I would like to know how I handle the depreciation and tax basis on this machine.

A. The cost basis is determined by what you paid for it, not by what it is worth or its appraised value, said Robert Greisman, tax partner with Grant Thornton.

"You have a good economic benefit, but that benefit cannot be translated to a tax benefit," explained Mr. Greisman. "The IRS won't permit a tax break or the depreciation of something you didn't pay for."

Q. Could you tell me about Manatron, what its product is, how long it has been around and how the future looks?

A. Manatron Inc. (around $4, over the counter) provides data processing and software systems for local governments in the Midwest, Florida and California. Systems include tax billing and collecting, property appraisal and financial management.

Earnings were down in Manatron's last fiscal year and again this year due to flat sales and delays on certain orders, noted Sharon Conway, based in Chicago with A.G. Edwards & Sons.

"Manatron finances continue to improve, it has completed a major acquisition and new products are well-received," said Ms. Conway. "A healthy future looks likely."

Q. I am able to purchase Hillhaven stock through payroll deduction. Is it a good investment right now?

A. Continue to buy shares of Hillhaven Corp. (around $2.50, American Stock Exchange), the nation's second-largest nursing home operator which was spun off from National Medical Enterprises two years ago, advised Richard Wholey of Chicago-based Wayne Hummer & Co.

The company is restructuring its businesses to concentrate on areas with greatest profit potential. Mr. Wholey believes that should pay off the next several years. "Demographics and the restructuring point to higher earnings and higher share price," Mr. Wholey concluded.

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