Change of manager at Magellan believed no cause for worrying

Answering the mail

May 13, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Question: I have my retirement account in Fidelity Magellan and am concerned about its change in manager. Should I hold on or sell?

Answer: There's no reason to be overly concerned about the surprise resignation by Fidelity Magellan manager Morris Smith after two years in that pressure-cooker job, since the man who takes the helm in July has an excellent track record.

Many experts for some time have considered replacement Jeffrey Vinik as perhaps the brightest fund manager at that mutual fund giant. His Growth & Income Fund and Smith's Magellan both registered gains of better than 40 percent last year.

"Vinik has built tremendous respect within the Fidelity organization with a smaller fund and is more of an innovator than Smith," observes Don Phillips, publisher of Morningstar Mutual Funds. "He'll keep Magellan competitive, but with its incredible $20 billion size, it still won't be able to shoot out the lights with its returns."

Magellan, which continued to attract new investors despite the departure of legendary manager Peter Lynch, is likely to keep on growing. Of course, no one ever can guarantee stock fund results.

Q. I am considering investing in American Express Co., but am a bit nervous about this. What are your thoughts?

A. This firm was far from golden for quite a while.

Your nervousness about American Express Co. (around $23 a share, New York Stock Exchange), the financial services and travel giant, is easy to trace. The company gained notoriety when it lost card members and merchants in a revolt against high fees. Its Shearson Lehman Brothers unit was suffering the same woes as other Wall Street firms in the late 1980s.

American Express has faced those significant problems and continues to improve its financial standing, says Lawrence Eckenfelder, of Prudential Securities.

One positive is its corporate card, which retains its strong market presence, he notes. At the same time, things are turning around for Wall Street and Shearson.

Q. I would like your comments on my 250 shares of International Paper Co. I have heard reports that its industry is rebounding and that now is the time to buy.

A. Expect paper profits. Buy shares of International Paper Co. (around $74, NYSE), a pulp, paper, lumber and plywood firm that suffered the smallest earnings decline in its industry during recession, says George Adler, analyst with Smith Barney, Harris Upham & Co.

It should do well as the economy improves, he believes. During the past decade, International Paper has been modernizing mills and improving efficiency. It acquired stable, growing specialty paper products, which have reduced the volatility of its paper business.

"The downside to International Paper is that it has gone deep into France and Germany at a time when the European economy is deteriorating," says Mr. Adler. "The question is whether overall earnings will do well with domestic sales up and international sales pulling downward."

Q. Can you tell me what the future holds for my investment in 3M? Should I continue to invest in this company?

A. Minnesota Mining & Manufacturing Co. (around $93, NYSE), famous maker of tapes and abrasives, is worth buying by investors with a long-range goal of prospering from the economic turnaround, says Michael Reilly, analyst with Piper, Jaffray & Co.

Sales in its recent quarter were flat, yet there's growing strength in the products it sells to the domestic car and housing market. The company has cut expenses the past couple of years, which means it is going into the recovery much leaner, Mr. Reilly notes.

"3M's international exposure provides a degree of uncertainty, since half of the firm's sales volume comes from abroad," Mr. Reilly cautions. "However, a positive is that international sales growth was 6 percent in the past quarter."

Q. I recently found some old stock certificates among some old papers of mine. I lost track of them and wonder if they're still around. What about Smart Fit Foundations Inc. and Old Hickory Copper Co.?

A. Smart Fit Foundations Inc., whose photocopied stock certificate you sent us features a rather dramatic drawing of a woman in lingerie holding a globe, unfortunately is no longer with us.

Last market for Smart Fit stock was in 1974 and the company was reorganized under Florida law, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm. Last known address for Smart Fit was P.O. Box 252, Hewlett, N.Y. 11557.

Old Hickory Copper Co., whose stingy management didn't see fit to include any artwork on its certificate, is no longer in existence. Last market on the over-the-counter exchange was in 1980 and its corporate charter was revoked in 1983.

Q. I have been an independent contractor for a sales agency for a while, but recently started a regular-paying part-time job. How should I handle my new situation on my tax return?

A. Though you file one return, consider these sources of income two different entities, says Robert Greisman, tax partner with Grant Thornton.

"Besides continuing to make estimated payments toward your independent contractor salary, you'll have W-2 income taxes taken care of for you at your other job," says Mr. Greisman. "Expenses related to your work as an independent contractor are reported on Schedule C, where you report your income."

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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