United Retirement delivers comfort

Answering the mail

June 24, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. Three other church elders and myself are in charge of recommending investments for our church. We like the safe nature of United Retirement Shares. Do you agree with this choice?

A. This low-risk stock fund has indeed been blessed with good returns. United Retirement Shares of Kansas City, Mo., can only be purchased by religious, educational or charitable institutions, foundations, pension trusts, or other tax-exempt entities.

While it's up just a fraction in 1992, that's better than the slight decline in the Standard & Poor's 500. It gained about 22 percent last year, compared with a 30 percent rise in the S&P 500.

The fund's portfolio consists of a fairly standard list of blue-chip companies such as Georgia-Pacific and General Motors, which is why it has been doing so well.

"United Retirement Shares has been an especially strong fund, since the 1987 stock market crash, when current portfolio management took over and improved returns which had previously been mediocre," observes John Rekenthaler, analyst with the Morningstar Inc. investment advisory firm.

"It's a good, steady performer and we recommend it to an organization such as yours seeking low risk."

Q. I bought a new car and found out the air bag is made by Morton International. I already own 15 shares. Should I buy more?

A. Unfortunately, this company does not live by air bags alone. Sell your shares of Morton International (around $55 a share, New York Stock Exchange), a company in specialty chemicals, salt and air bags, because its specialty chemicals division has been hit hard by recession and cutbacks in orders, says William Steele, analyst with Dean Witter Reynolds Inc.

While it's true that the company did sell $225 million worth of air bags last year and there's a federal air bag requirement for 1995, all of that is already factored into Morton's current stock price.

Specialty chemicals, unfortunately, account for about two-thirds of overall revenues. That division's poor performance probably will last through 1992 and the outlook for 1993 remains sketchy, says Steele.

"At the same time, Morton's salt division basically offers a flat cash flow situation," says Steele.

"So, while the air bags are definitely a jewel for Morton, it's simply not enough reason for you to keep holding the stock."

Q. I would appreciate your thoughts on Snap-On Tools stock. My brother-in-law and I use the tools in our shops and like the quality. But is it a good investment?

A. Buy shares of Snap-On Tools (around $33, NYSE) because its sales of power tools, electronic and shop equipment and tool storage units will benefit from a turnaround in the auto industry, says John Merrick, analyst with Kemper Securities Group.

That weak industry, coupled with economic recessions in the United States and the United Kingdom, led to a decline in 1991 sales.

However, domestic sales are starting to pick up this year.

"We like Snap-on Tools' plans to save millions of dollars by consolidating from a large number of domestic warehouses to only four distribution centers," explains Merrick.

"The company's debt load is so small that it is able to use free cash for acquisitions or quality enhancement programs."

Q. Your assistance is requested regarding some stock certificates found upon the deaths of my parents. The certificates are for Doris Ruby Mining Co. and James G. Heggie Manufacturing Co. Are they worth anything?

A. Both companies went out of business during World War II. As a result, neither offers any current value to shareholders, according to Robert Fisher, vice president of the New York's R.M. Smythe & Co. stock-search firm.

Doris Ruby Mining Co., incorporated in Colorado with offices in Buena Vista, Calif., went out of business in 1940.

Meanwhile, James G. Heggie Manufacturing Co., a firm in Joliet, Ill., that was in steel plate construction, bit the dust in 1943.

Q. My wife and I are interested in buying a leisure boat for $25,000 to $30,000, which we will finance. Does the luxury tax still exist? Can I deduct interest on the boat loan?

A. While the so-called luxury tax is still in existence, you won't have to pay that sales tax because your boat costs less than $100,000, says Robert Greisman, tax partner with Grant Thornton accounting. The luxury tax on boats is 10 percent of the retail price in excess of that $100,000 minimum.

As a result, if the boat had cost $150,000, that tax would have applied only to $50,000 of the total price.

"In response to your second question, personal interest expense no longer qualifies as a deduction," says Greisman.

"Therefore, I would consider obtaining financing through a home-equity loan, so that you could deduct that interest expense."

Q. I have 50 shares of Stanley Works that I purchased two years ago. With its roller-coaster ups and downs during that time, I am wondering if I should continue to hold on for the ride.

A. Hold your shares of Stanley Works (around $40, NYSE), since an upturn in the housing market should translate into an improved bottom line and an increase in stock price, advises Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

The company is a major producer of hand tools for construction, industrial and consumer markets, as well as other household, builder and industrial products. Earnings per share have been flat this year, as they were last year.

"Although a big move in the shares of Stanley Works is unlikely near-term, growth in earnings lies ahead," concludes Conway. "For example, its European and Canadian operations are expected to do better."

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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