Don't play around, buy Mattel

Answering the mail

July 01, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. Since I have three daughters and all seem to love their Barbie dolls and accessories, I thought it was high time to profit from Mattel's success by buying some of its stock. Is this a wise choice for an inexperienced investor?

A. The way that famous doll keeps on going, your great-great-grandchildren may one day be playing with "new, improved" Barbies.

Based on Barbie's continued popularity and her generous contribution of $750 million in sales to Mattel Inc. (around $24 a share, New York Stock Exchange) last year, you should buy this stock, counseled Thomas Kully, analyst with William Blair & Co.

Just when you think you've seen the last possible new twist to the Barbie line, Mattel manages to come up with something new.

For example, the "Totally Hair" Barbie is popular right now and her cosmetic line introduced last year is another big hit.

Barbie and her related accessories and products constitute about half of Mattel's total sales.

However, other products, such as Hot Wheels, have also prospered and Mattel's 1992 sales are up 25 percent.

Its announced acquisition of International Games Inc., maker of the Uno card game, is another plus.

"A positive sign for Mattel is its involvement with the upcoming Walt Disney film 'Aladdin,' " concluded Kully. "It is producing a figurine toy tied to that film which should do well."

Q. I am not happy with my shares of Deere & Co. The company's sales don't seem to be going anywhere. I thought we were in an economic recovery period. What should I do?

A. Earnings remain plowed under.

Hold your shares of Deere & Co. (around $42, NYSE) because, with weak near-term prospects already built into its stock price, it isn't the time to unload this farm equipment giant, said Steven Colbert, analyst with Prudential Securities.

Earnings were battered by the recession and equipment sales remain slow.

At the same time, the company desperately needs to reduce its production levels because they could easily build to dangerous levels because of the low level of sales, Colbert believes.

"Deere's stock earlier this year benefited from the move toward capital goods stocks, but its underlying problems must be solved for an upswing to be sustained," said Colbert.

"I look for 1993 to be a good year, so hold on and ride out the worst, which should soon be behind it."

Q. Do these shares have any value, or should I use them to paper my wall? I moved recently and, going through papers, found stock certificates purchased in the 1970s for Union Petrochemical of Nevada.

A. Hope they're colorful. Get out the paste and start decorating, for your shares unfortunately are worthless.

While United Petrochemical of Nevada is still in existence, its stock status is inactive and it hasn't been traded since 1980, according to Robert Fisher, vice president with the New York-based R.M. Smythe stock-search firm.

The last contact for further information was Ronald Manarey, secretary-treasurer, United Petrochemical, 1517 Raindance, Las Vegas, Nev. 89109.

Q. My broker has been recommending several large aerospace companies, especially United Technologies. I'd like to know more.

A. Buy shares of United Technologies (around $51, NYSE), an international aerospace company likely to experience solid earnings improvements over the next several years, said Wolfgang Demisch, analyst with UBS Securities.

Its varied product line also includes elevators, air conditioners and jet engines.

"United Technologies has improved productivity, put more focused leadership into place and concentrated on its manufacturing efficiency," noted Demisch.

"The company really has what it takes to be a global competitor because it can produce more with less technological expense."

Q. Can you find out if Cherokee Inc. is a good quality investment? I am interested in investing in it.

A. Don't buy shares of Cherokee Inc. (around $1.50, over the counter) until it comes up with some better results, advised Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

This designer and maker of U.S.-made moderately priced women's casual apparel and footwear became public in June of last year.

It's known for styles that are less subject to fashion obsolescence.

They're sold in 12,000 department, specialty and discount stores and the company also licenses its brand name to others.

Unfortunately, the company has been hurt considerably by a weak California retail market.

Losses did, however, narrow in the most recent period.

"For now, I wouldn't buy shares of Cherokee, but instead would wait awhile for an economic improvement and stronger returns," said Conway.

Q. My broker is pushing Pall Corp., but I'm not so sure. What's your opinion?

A. Thank your broker for a good suggestion on Pall Corp. (around $25, American Stock Exchange), the leading producer of disposable filters for the health-care, aerospace and fluid-processing markets, said Richard Wholey of Chicago-based Wayne Hummer & Co.

The company's sales and earnings growth over the past decade has been excellent.

Its health care unit is capitalizing on strong demand for filters that lower the risk of disease transmission from blood transfusions.

Other company units are also experiencing healthy sales gains.

"Down from a high of $30, Pall Corp. stock looks like a promising growth candidate that you should add to your portfolio," said Wholey.

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

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