The Limited has limitless potential nothing's left of Seaboard Oil & Gas

Answering the mail

August 12, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Q. My stock in the Limited has had its ups and downs. Is this the right time to buy more?

A. The potential is unlimited.

Buy more stock of the Limited Inc. (around $22 a share, New York Stock Exchange) because it's undervalued when one considers the long-term prospects of its diversified fashion divisions and the excellence of its management, advised Steve Kernkraut, analyst with Bear Stearns.

The addition of upscale store Henri Bendel to the Limited's mass retailing and lower-price apparel businesses is a definite plus, he believes.

The impressive successes of its Victoria's Secret lingerie chain and Express stores have balanced out problems experienced in its core business, the Limited stores.

The Limited Inc. is an enormous retailer, operating more than 4,000 stores.

Saying it is diversified is an understatement.

Among its other chains are Lerner, Abercrombie & Fitch, Structure, Limited Too and Cacique.

"We'll have to wait to see how the company handles more on its plate, since it has announced considerable expansion," Mr. Kernkraut said, noting that it has proved itself adept at capturing market share at the expense of competitors.

"But the prospects do look promising."

Q. My friends at prayer group have mentioned a mutual fund that is supposedly pretty good, called USAA Mutual Income. My wife and I would appreciate some more information about it.

A. One wouldn't expect flamboyant tips from a prayer group, and this investment is indeed conservative and low-risk.

USAA Mutual Income Fund hasn't lost any money for investors in a dozen years.

Eighty percent of its portfolio is in bonds.

Other holdings include preferred stocks, securities of the U.S. government and its agencies, and common stocks.

If judged necessary, as much as 100 percent of the fund's assets may be invested in short-term securities.

After a 19 percent gain in total return last year, USAA Mutual Income is up about 3 percent this year.

Its 10-year performance average is 14 percent, according to the Morningstar Inc. fund-tracking advisory, which gives the fund its highest five-star investment rating.

"One word of caution with USAA Mutual Income is that it's a little interest-rate sensitive, since utilities do well when there are low interest rates and bond prices go down when interest rates spike," pointed out Eileen Sanders, an analyst with Morningstar.

The fund has no "load" (initial sales charge) and is managed by John Saunders Jr.

For more information, contact USAA Mutual Income Fund, USAA Building, San Antonio, Texas 78288.

Q. My wife and I have had some success with our investment in Kaufman & Broad Home Corp. However, we're nervous because the housing picture isn't improving like we thought it would. Do we take the opportunity to sell now or keep holding?

A. Home building always carries risk, but this stock offers calculated risk.

Hold on to your shares of Kaufman & Broad Home Corp. (around $15, NYSE) because this homebuilder is an exception to the nation's overall home building doldrums and should only profit more once the market really does turn around, said Gary Gordon, analyst with PaineWebber Inc.

Its niche is starter homes, and it has been quite successful despite the recession and poor real estate environment in its home state of California.

Strong advertising and cost cuts have helped.

Profits tripled in the final quarter of last year, and market share has been increasing as well.

In the most recent quarter, its new home deliveries were up 18 percent.

All of this has translated to an upswing in its stock price.

"Kaufman & Broad Home Corp. has a good credit history and access to bank money that competitors do not have," added Mr. Gordon.

"There are always risks in the housing industry, should housing starts and sales continue so slow that it eventually causes Kaufman & Broad problems, but right now it's worth holding on to those shares."

It should be noted that the company also has operations in Paris and Toronto. Revenues from commercial projects in France are down this year, though residential home deliveries there are flat.

Q. I recently located a Seaboard Oil & Gas Co. stock certificate for $5,000, dated 1919. What's the value of this investment?

A. No energy is left in this oil and gas company.

Seaboard Oil & Gas Co., incorporated in Delaware with offices in Oklahoma, forfeited its charter in 1932 and is no longer in business.

There was no shareholder equity left at that time, so your shares unfortunately have no value, said Robert Fisher, vice president with the New York-based R. M. Smythe & Co. stock-search firm.

Q. I am thinking about investing in China Light & Power. Can you tell me something about this company?

A. While such a stock is harder to follow than your average, everyday selection, there is investment potential.

China Light & Power (around $4, over the counter) generates and sells electricity from three Hong Kong affiliates to 1.5 million customers in the New Territories. The affiliates are 40 percent owned by the company and 60 percent owned by Exxon Energy Ltd.

While the company is growing, its share price hasn't moved much in a few months.

"This is a reasonably priced choice for long-term aggressive, well-diversified portfolios," explained Sharon Conway, based in Chicago with A. G. Edwards & Sons. "The company is paying a quarterly dividend and has nowhere to go but up, so I expect growth."

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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