Institutional Investors

Q. Why do companies buy back their own stock, and does it help me as an investor? They present it as a good thing. K.C., via the Internet A. Companies holding a lot of extra cash are aggressively purchasing their own shares this year. Historically, 20 percent of the companies in the Standard & Poor's 500 reduce their share number through buybacks each year. This rose to 33 percent in the first quarter of this year and 50 percent in the second quarter, according to Standard & Poor's Corp.

Standard & Poor's Corp. yesterday lowered the ratings on McDonnell Douglas debt, the third such reduction since last year, citing cost pressures on military programs and the recent cancellation of the $57 billion Navy A-12 attack jet program.The St. Louis-based aerospace company's senior debt was reduced to a triple B rating -- the lowest rating still considered "investment grade." Many institutional investors have bylaws requiring that they hold only investment grade securities.The downgrading affects all of McDonnell's $5.6 billion in debt, including that issued by the company's financial services unit.

The Alex. Brown & Sons annual Consumer Growth Stock Seminar hardly seems a hotbed of liberal Democrats, but two-thirds of the institutional investors attending this year's conference think President-elect Bill Clinton will help stimulate consumer spending next year.That result came as part of a survey released yesterday by Alex. Brown, which asked nearly 200 investment professionals who took part in the two-day annual conference about their outlook for the consumer economy.The informal survey found broad optimism among investors about prospects for the holiday shopping season and next year's consumer spending.

State Street Global Advisors, the money management arm of State Street Corp., is getting into the affordable housing business.State Street said last week that it has created an investment fund for institutional investors that will provide up to $100 million in mortgage money for affordable units around the country. That could produce 4,000 units of housing over the next three years.State Street put together the fund with the thought that it would offer competitive rates for fixed-income investors.

Legg Mason Inc., a Baltimore-based stock brokerage company, has acquired a large portion of the servicing portfolio of the commercial mortgage division of Southeast Mortgage Co., a subsidiary of Southeast Bank of Miami. Terms of the sale, which was announced yesterday, were not disclosed.The commercial unit of Southeast Mortgage, which handles a portfolio of $1.25 billion for institutional investors, has 28 workers and has offices in Miami and Fort Lauderdale, Fla.; Charlotte and Raleigh, N.C.; and Atlanta.

Wilmer, Cutler & Pickering, the Washington-based law firm that is hiring Mayor Kurt L. Schmoke, yesterday recruited two Piper & Marbury partners to its Baltimore office.The addition of Mark Pollak and Ted Millspaugh from Piper & Marbury puts the number of Wilmer, Cutler & Pickering Baltimore lawyers at 12. It comes three weeks after the firm said Schmoke would join the Baltimore office at the end of his term in December."Our legal practice is alive and well in Baltimore," said George P. Stamas, who left Piper & Marbury three years ago to open Wilmer, Cutler & Pickering's Baltimore office.

The days of easy money for many consumers with bad credit may be about to end.In a sign that an emerging global credit crunch may soon affect more U.S. consumers, companies that specialize in so-called "sub-prime" lending to people with blotched credit records -- often via high-interest home equity loans -- are quickly running out of money as banks and investors cut off their funds.The result is that many of the consumers who rely on such loans, frequently as a way to consolidate other debts, may be forced to pay even higher interest rates -- if they can get the money at all.While that could be a hardship for individual consumers, many financial counselors would cheer a trend away from the aggressive marketing of loans they say ultimately will get too many borrowers in trouble.

T. Rowe Price Associates Inc. said that it is launching a new Maryland tax-free money market fund today that generates income exempt from federal, state and local taxes for Maryland residents. The fund, called the T. Rowe Price Maryland Tax-Free Money Market Fund, invests in short-term Maryland municipal securities and is designed to preserve investors' principal. It is the Baltimore-based mutual fund company's third fund that invests primarily in Maryland municipal securities. The minimum initial investment is $2,500.

Blaming a market saturated with new stock offerings, Black & Decker Corp. postponed yesterday the initial public offering for PRC Advanced Systems Inc., its computer systems subsidiary.It was the second unsuccessful effort by the Towson-based maker of power tools and appliances to sell the subsidiary since it was acquired as part of the purchase of Emhart Corp. in 1989.The company's announcement came after Black & Decker made a series of presentations that failed to draw the desired number of institutional investors.

PHILADELPHIA -- Conrail stockholders, clearly looking for the most money, yesterday emphatically rejected a proposal that would have allowed CSX Corp. to proceed with its takeover of the huge railroad.Voting for the first time in the heated takeover fight, Conrail shareholders defeated a plan proposed by Conrail's board of directors to "opt out" of a Pennsylvania law that prohibits two-tiered takeover offers such as CSX's $104 a share cash-and-stock, or $9.3 billion, deal.The outcome was a victory for Norfolk Southern Corp.