Prospects bright for Colgate

Answering the mail

June 17, 1992|By Andrew Leckey | Andrew Leckey,1992 Tribune Media Services

Q. We prefer to invest in stocks that are exciting, but our broker keeps mentioning Colgate-Palmolive Co. I don't think it's growing as fast as some newer companies. What do you think?

A. It isn't one of those newfangled technology stocks, but prospects are as refreshing as an Irish spring.

Colgate-Palmolive Co. (around $52 a share, New York Stock Exchange) offers significant growth potential, said Deepak Raj, analyst with Merrill Lynch & Co. This famous maker of household and personal-health items such as Fab, Fresh Start, Ultra Brite and Irish Spring will benefit from its acquisition of Mennen, which has growth potential in the United States and more opportunities for expansion in Latin America.

Combined with solid growth in its core businesses, companywide sales increases of 16 percent in 1992 and 13 percent in 1993 are likely.

"Even if you took away the contribution Mennen is making to sales growth, this stock remains a buy," Mr. Raj concluded.

Q. My wife and I are retirees from the railroad and like our utilities investments. Should we buy more shares of Commonwealth Edison? We have 300 shares and like the dividend.

A. Hold existing shares, but don't buy more shares of electric utility Commonwealth Edison (around $31, NYSE) right now, advised Gary Hovis, analyst with Argus Research. He reduced his buy recommendation to a hold two months ago.

"With pending cases on its Braidwood and Byron nuclear plants in Illinois, I don't want to be overly positive," Mr. Hovis said. "Commonwealth Edison shares are held by a large number of retirees such as yourselves, and until these issues are resolved, buying more won't be in your best interest."

The company's $3-a-share dividend is fairly secure and has been in place for the past six years, but it's unlikely to increase that dividend for another two years, Mr. Hovis believes.

Commonwealth Edison stock is best for a patient long-term investor.

Q. I would appreciate an opinion on Browning-Ferris Industries. While I've read that it is time to buy, the earnings don't seem that positive. Can you help me?

A. Things are turning around for Browning-Ferris Industries (around $21, NYSE), and this waste-management company should have good earnings comparisons in the fourth quarter for the first time in two years, said Harry Blount, analyst with Rauscher Pierce Refsnes Inc.

The industry is improving and the company has better relations with regulators. It now has three landfill sites approved in Ohio, where it once had problems, with one of the landfills among the nation's largest.

"With improved relations, Browning-Ferris can increase asset size and make long-term plans," Mr. Blount said. "Now is the time to buy, before it takes off in the fourth quarter."

Q. I inherited 200 shares of Mohawk Business Machines Corp. Do they have any value?

A. Mohawk Business Machines, incorporated in Maryland, changed its name to Mohawk Electronics Corp. in 1961, according to Robert Fisher, vice president with the New York-based R. M. Smythe & Co. stock-search firm.

The firm went bankrupt in 1965 with no stockholder equity available, so your shares, unfortunately, are worthless.

Q. I am about to sell my first shares of stock and would like to know the rules for capital loss or gains. I have owned these 45 shares for 3 1/2 years.

A. Any stock held for more than one year from the date of purchase is classified as a long-term capital gain or loss, explained James Schlesser, tax partner with Deloitte & Touche.

All capital gains or losses derived from any investment, such as stocks, bonds or property, are grouped together into a lump sum, with the net either a gain or loss.

"If the net is a capital loss, you are only able to deduct $3,000 a year and carry forward the balance of the loss for future years, to be used at $3,000 a year or applied when there is a gain," Mr. Schlesser said.

"If there is a capital gain, you generally would add it to your regular sources of income, such as wages and dividends, and pay taxes based on a regular tax rate."

Q. I am interested in purchasing shares of Datascope. What's your recommendation?

A. Datascope Corp. (around $25, over-the-counter), leading manufacturer of medical devices for cardiac patients, is selling at half its 1992 high and would make a fine addition to a growth-oriented portfolio, said Richard Wholey of Chicago-based Wayne Hummer & Co.

The company's primary product is an intra-aortic balloon pumping system used to support the heart in cardiac shock, heart failure and surgical procedures. It also manufactures patient safety monitoring products.

"Datascope's future looks promising, with earnings growth excellent as new product lines add to an already solid line," Mr. Wholey said.

Q. I hold 1,190 shares of Sterling Bancorp stock. Should I continue to hold? What are the long-term prospects?

A. Sterling Bancorp (around $9, NYSE), holding company for a $534 million New York City bank, is worth holding based on fundamentals, said Sharon Conway, based in Chicago with A. G. Edwards & Sons Inc.

It focuses on middle-market companies and works with big law firms dealing in bankruptcy practice. Last year's bottom line suffered from a need to beef up its loan provision due to the Chapter 11 filing of a real estate company client, but there's been improvement this year.

"Although economic conditions are still weak in New York, Sterling should improve and its share price should mirror this," Ms. Conway said.

"Two top officers died in the past six months and the market is acting as though a merger is possible, but I wouldn't buy strictly on such expectations."

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill. 60611.

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