Legg Mason's picks include holdovers

November 22, 1994|By David Conn | David Conn,Sun Staff Writer

Devotees of Legg Mason Inc.'s annual Thanksgiving List of stock picks clearly have one thing to be thankful for this year: that last year's list ended up in the black.

After a tough year on Wall Street, the Baltimore investment firm's 1993 offering of a dozen stocks managed a respectable 4.4 percent gain, compared with a 3.0 percent increase from the Standard & Poor's 500 stock index, Legg Mason announced yesterday.

Both returns assume dividends were reinvested in the stocks, and neither includes commissions. The Thanksgiving List performance is calculated for an investor who puts an equal amount of money in each stock.

Legg Mason's consistent performance has made the company's annual tip list more than merely a local favorite. Since 1979, when the tradition began, the Thanksgiving List has produced an average annual return of 27.2 percent, compared with the S&P 500's 16.0 percent average return.

The Legg Mason list, typically heavy on lesser-known and otherwise undervalued stocks, has outperformed the S&P in 13 of the past 16 years. Last year, though, it underperformed the Dow Jones industrial average, which had almost a 6.7 percent return during the same period, including dividends.

Since 1991, the year after Legg Mason's list suffered a 24.6 percent drop, the company has "managed" its annual list, replacing some stocks throughout the year as problems crop up, or when price targets are met.

If all stocks on last year's original list had been held for the full year, they would have lost an average 5.5 percent.

Each year the list is culled from recommendations made by Legg Mason's research department. "Consistent with the firm's value-oriented investment management style, this year's stocks either sell at a low mutiple of earnings or book value, provide an above-average dividend yield or possess other characteristics that suggest they are undervalued or overlooked by investors," the company said.

This year's offering includes two holdovers from 1993: Independent Bank Corp. , a small Massachusetts bank holding company that gained 17.3 percent since last November; and Waban Inc., a Natick, Mass., retailer which owns the Homebase and BJ's warehouse clubs. Waban's stock was up 33.3 percent since a year ago.

The rest of this year's stocks fall into several broad categories, including:

* Retailers -- Food Lion Inc., the Salisbury, N.C., supermarket chain; Rhodes Inc., a home furnishings retailer based in Atlanta; Hi-Lo Automotive, an auto parts retailer in Houston; and fast-food franchiser Wendy's International, of Dublin, Ohio.

* Financial companies -- Advanta Corp., the Horsham, Pa., credit card and mortgage company; and Kranzco Realty Trust, a real estate investment trust in Conshohocken, Pa., that operates several dozen shopping centers, including some in Maryland.

* Diversified manufacturers -- Borg-Warner Security Corp. a Chicago company that makes security systems, and offers a variety of security services; and Figgie International of Willoughby, Ohio, which makes various military, consumer and apparel products.

Some miscellaneous stocks include Carnival Corp., the Miami-based cruise ship company, and Times Mirror Corp., the Los Angeles publishing and broadcasting company that is the parent of The Sun.

LEGG MASON PICKS

Legg Mason's Thanksgiving List for 1995 includes a dozen stocks picked by the company's research department as outstanding investment opportunities for the year ahead.

* Advanta Corp.

* Borg-Warner Security Corp.

* Carnival Corp.

* Figgie International

* Food Lion Inc.

* Hi-Lo Automotive

* Independent Bank Corp.

* Kranzco Realty Trust

* Rhodes Inc.

* Times Mirror Co.

* Waban Inc.

* Wendy's International

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