Sony rates a `hold,' despite tech setbacks

Your Money

November 05, 2006|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Will my Sony Corp. stock ever do any better?

- K.R., via the Internet

Introduction of Trinitron television sets and Walkman portable music players vaulted this Japanese consumer-electronics brand to the forefront years ago, but that seems a distant past.

It is good news for shoppers this holiday season, but not for Sony, that sales of liquid-crystal-display televisions will be competitive and price-driven. Rivals Panasonic Corp. of North America and Samsung Electronics Co. are ready for a fight.

That's not all Sony has to worry about.

Earnings declined 94 percent in its July-to-September quarter, due in part to the embarrassing battery recall involving most major computer-makers that cost it about $430 million in the quarter. Dell Inc. and Apple Computer Inc. initially discovered that the Sony-made power packs could overheat.

Shares of Sony (SNE) are down 1 percent this year, following gains of 5 percent last year and 12 percent in 2004. Due to the battery problems and the likelihood that financial performance will continue to weaken, Fitch Ratings downgraded Sony's long-term debt to triple-B-plus from single-A-minus.

In video games, Sony must contend with the popularity of Nintendo's DS hand-held unit and Microsoft Corp.'s Xbox 360.

Profit in Sony's electronics business was down 71 percent in its recent quarter as it readied the November launch of its PlayStation 3 console that features the high-definition video of Blu-ray DVD technology. It is designed to become the heart of its home-video system.

Earnings are expected to increase 16 percent this year and 79 percent in 2007, according to Thomson Financial. The five-year annualized growth rate is forecast as 13 percent.

Sony's powerful brand, marketing might and potential give its stock a consensus rating of "hold" by the Wall Street analysts who track it, according to Thomson Financial. That consists of two "buys," two "holds" and one "strong sell."

Does Fidelity Utilities Fund look like a good bet for my individual retirement account?

- C.J., via the Internet

This interesting play on telecommunications and utilities performs a little better than the Russell 3000 Utilities Index in most years.

It is somewhat more volatile than its peers because it owns less than 40 stock names and is willing to make big bets on individual companies.

The $1.35 billion Fidelity Utilities Fund (FIUIX) is up 25 percent this year to rank in the top 12 percent of utilities funds. Its three-year annualized return of 20 percent places it below the midpoint of its peers.

Forty-seven percent of fund assets are in telecommunications, 40 percent in utilities and 9 percent in media.

Recent holdings were AT&T, Verizon Communications, Comcast Corp., BellSouth, AES Corp., Sprint Nextel, TXU Corp., Exelon Corp., Duke Energy and Alltel Communications Inc.

This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has an annual expense ratio of 0.84 percent.

Andrew Leckey writes for Tribune Media Services.

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