Utility fund aims for appreciation

Answering the Mail

July 08, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. My friends and I have been comparing yields on our utilities funds and mine seems to come up a bit short. Can you help out a senior citizen and give me some advice regarding Fidelity Utilities Income Fund?

A. What a difference a year makes. Shareholders who benefited from that fund's aggressive strategy in 1991 haven't done as well this year.

Fidelity Utilities Income Fund had a total return of 21 percent in 1991. Investors, shocked by declining interest rates, flocked to the high yields of utility stocks and share prices rose accordingly.

This year, as you've noted, the fund is up just a fraction and ranks ninth in performance among the 24 largest utility funds. That stems from the fact that, besides current income, Fidelity Utilities Income Fund ambitiously seeks income growth and capital appreciation.

"This is a good fund backed by a solid mutual fund family, but it's a little more aggressive than most utility funds in seeking out growth vs. just income," explained Anthony Mayorkas, analyst with the Morningstar Inc. investment advisory. "Other funds that are strictly income-oriented hold a more conservative utilities portfolio and obtain higher yields."

Investors in Fidelity Utilities Income Fund must expect its yield to trail the competition, in the hope it will make up for this in capital appreciation when trends are in its favor.

Q. I own several shares of Charles Schwab and love it. I had my best year with it last year. I was wondering, with the stock market going slow, if I should continue to hold or cash in my profits.

A. Hold your investment in discount broker Charles Schwab Corp. (around $23 a share, New York Stock Exchange) because of its bright future, but don't buy more shares for the time being, advised Larry Eckenfelder, analyst with Prudential Securities. They're simply too expensive, a result of last year's 27 percent increase in sales and 150 percent rise in profits.

"The financial services industry has benefited from the individual investor coming back to the market," Mr. Eckenfelder noted.

"Schwab has a lot of name brand recognition, its 1.6 million accounts are serviced by 162 branch offices and its profits are spent wisely."

Profits are directed into marketing, technological advances and customer services. Its TeleBroker service for account balance inquiries and expansion into ethnic markets should improve the long-term outlook, Mr. Eckenfelder predicted.

Q. I have been hearing rumors about ConAgra Inc. doing a lot of business with the Russians and thought this would help my 145 shares. Yet it hasn't really been performing well. What's up?

A. Deals involving the Russians don't always prosper quickly.

Nonetheless, hold and buy more shares of food products firm ConAgra Inc. (around $26, NYSE) because it does have those Russian opportunities, said Roger Spencer, analyst with PaineWebber Inc.

The reason ConAgra's stock is down by 30 percent is its involvement in the frozen dinner entree business, which is competitive and expensive to enter.

"This is a buying opportunity because the worst appears to be over and it's a great time to buy a quality investment," Mr. Spencer said. "I look for a flat first fiscal quarter ending in August and strong quarterly comparisons thereafter."

Getting back to the Russian aspect, ConAgra and the former Soviet Union announced a joint venture a year ago named Chilewich Group. It will eventually develop a market there for ConAgra's processed goods, which should be a boost for the company.

Q. I have stock certificates no longer listed in the newspaper for 300 shares of American Surgery Centers. Do they have value? Are they even traded?

A. Shares of American Surgery Centers have some value, but it's modest. Shares are traded on the over-the-counter market at .005 cents bid and 2 cents offer, according to Robert Fisher, vice president with the New York-based R. M. Smythe & Co. stock-search firm.

Incorporated in Utah, American Surgery Centers' last known address was 1815 W. First Ave., No. 146, Mesa, Ariz. 85202.

Q. What should I do about my Apple Computer stock? I have a good profit, but the share price is slipping. Should I hold or sell?

A. Hold shares of Apple Computer (around $45, over the counter) based on its excellent long-term prospects as a company certain to remain a force in personal computers, said Richard Wholey of Chicago-based Wayne Hummer & Co.

The industry is undergoing price-cutting that involves competitors such as IBM and Compaq Computer, as each tries to gain market share. Profits are suffering.

"As weaker companies drop out of personal computers, pricing will firm and profit margins will rise," Mr. Wholey predicted.

"In the meantime, Apple is profitable and continues to introduce new products and upgrade existing lines."

Q. I have 4,600 shares of National Media purchased at an average price of $4.50 a share over the past two years. Would you assess the risk of continuing to hold these shares, vs. future gains?

A. Hold National Media Corp. (around $6, NYSE) and, if you're aggressive, buy more on price dips, advised Sharon Conway, based in Chicago with A. G. Edwards & Sons Inc.

The company is a direct marketer of consumer products through television, catalogs, credit card syndication, direct mail and telemarketing. Despite a gain in its last fiscal quarter, the company suffered a loss for the full fiscal year.

"A new management team, a new business strategy and more efficient advertising helped in the final quarter," Ms. Conway said.

"In addition, acquisition of assets from Quantum Marketing International have helped build a strong franchise in Europe."

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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