Windsor Fund's average return has been 15.72% over 10 years

Answering the Mail

May 06, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. My company's profit-sharing fund gives us the choice to invest in a fund called Windsor. I have heard the fund is large, but don't know how well it has been doing. Can you give me some advice?

A. Bigger isn't always better, but this is one giant that has done quite well over the long haul.

Vanguard Group's Windsor Fund is so large at $7 billion in assets that it's closed to new investors. Your employer apparently is a shareholder of record, thereby permitted to make subsequent investments.

Run by veteran fund manager John Neff, Windsor has a fine 10-year average annual return of 15.72 percent. Its return last year of 28.55 percent was slightly less than the overall market, while its 1992 return of 4.27 percent through the end of March was slightly better than the market.

"The potential drawback in investing in the Windsor Fund is that, due to its size, it will be more difficult to replicate its earlier success," said John Rekenthaler, analyst with the Morningstar Inc. fund-tracking firm. "Nonetheless, the fund has undeniably done well."

Windsor is a classic "value-investing" fund that buys stock in big, established firms when it is available cheaply. Mr. Neff prefers overlooked or undervalued issues, Mr. Rekenthaler noted. For those interested in the goals of this fund, Vanguard Group offers a similar fund named Windsor II which is open to the public.

Q. What are your thoughts on investing in Navistar International? I have been reading that this type of stock is doing well due to economic recovery.

A. Not all stocks remain in the same high gear as their group.

Navistar International (around $3 a share, New York Stock Exchange), largest producer of medium- and heavy-duty trucks in North America, unfortunately has more problems than some other capital goods companies, said Eli Lustgarten, analyst with PaineWebber Inc.

Despite its cost-cutting efforts, improvement in its efficiency and the fact its industry is enjoying a recovery, Navistar earnings remain under pressure. Sales volume simply isn't where it should be, Mr. Lustgarten said.

"I'm lukewarm about Navistar, offering my 'neutral' rating of its stock, for there are other capital goods companies offering the full benefits of the cyclical recovery," he said. "The company's whole cost structure is out of whack and such things take time to mend."

Q. Now that all the negative press about military contractors has died down, should I add more shares of McDonnell Douglas to my portfolio?

A. The stock of McDonnell Douglas (around $58, NYSE) remains "an interesting but speculative buy," said Wolfgang Demisch, analyst with UBS Securities.

The company is the leading military contractor, the second-largest U.S. airliner builder and the third-largest producer worldwide of civil aircraft.

One problem, in Demisch's opinion, is that McDonnell Douglas needs to expand the number of products it offers. Perhaps the biggest concern is that it's under financial stress because of costs incurred in developing and building its C-17 military cargo carrier and its MD-11 commercial aircraft, he said.

McDonnell Douglas needs money to stay competitive in civil aircraft with Boeing Co. and Europe's Airbus International, both of which offer a wide array of products, Mr. Demisch said. It's seeking an international partner or partners for joint ventures to develop and bring such products to market.

"McDonnell Douglas has not realized its potential because of a stressed financial situation, and that's what keeps its stock speculative," Mr. Demisch said. "However, its stock is selling at 60 percent of book value and does have potential."

Q. My elderly mother lives with me and I provide for her. She only receives a Social Security check. Can I claim her as a personal exemption?

A. If you're providing more than half of your mother's support (including room and board) and your mother's income is less than $2,150, you can claim her as a dependent and personal exemption, said Barbara Pope, tax partner with Price Waterhouse.

"If your mother's income is higher than that minimum but you're still providing her with more than half of her support, you can claim her medical expenses on your return, but you can't take the personal exemption."

Q. We recently heard that National Fuel Gas is a good investment. Do you agree? What's your opinion of this company?

A. National Fuel Gas (around $24, NYSE) is a utility holding company that distributes natural gas in western New York, northwestern Pennsylvania and eastern Ohio. It is also in gas exploration, production, transmission and storage. While earnings per share were down last year, they've improved this year.

"Unless weather conditions have a dire effect, National Fuel Gas should continue to perform well and its dividend yield is attractive," said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc. "Long-term investors should see positive total returns."

Q. I've been thinking about buying Biomet stock, but I'm wary of its high price-to-earnings multiple. Should I buy?

A. Don't buy shares of Biomet Inc. (around $18, over the counter) until there's a further drop in its share price, since it trades at more than 45 times its earnings, said Richard Wholey of Chicago-based Wayne Hummer & Co.

The company designs, manufactures and markets surgical implants and orthopedic support devices. "Revenue and profit growth are expected to be excellent in the years ahead, but it would seem this is well-reflected in the share price," Mr. Wholey said.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill. 60615.

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