Procter & Gamble offers heavenly prospects for the long term


Q.My wife and I own 46 shares of Procter & Gamble and would really like to hold on to them. My son-in-law, the investor, says there are better stocks. What do you think?

A.This famous company, which recently modified its corporate logo following years of taunts that its intricate design smacked of devil worship, offers heavenly long-term prospects.

Hold your shares of Procter & Gamble (around $80 a share, New York Stock Exchange), the household, personal-care and food-product firm, even though it is likely to have flat earnings the next two or three quarters, said Deepak Raj, analyst with Merrill Lynch & Co.

It makes sense to buy its shares with a long-term perspective, since its brand-name products are well-liked by loyal consumers.

"P&G; is suffering from stiff competitive pricing in the United States, and its detergent products internationally are pitted against strong products from Unilever," explained Raj. "The climbing U.S. dollar will depress earnings for the short run, so you'll have to be patient."

Q. I can't see my 50 shares of Rockwell International going anywhere. What do you think? I think its reliance on military contracts isn't good.

A. Hold your shares of Rockwell International (around $27, NYSE), a company best-known for military electronics and aerospace vehicle parts, because it wisely cut back its reliance on defense contracts in the mid-1980s, said Wendy Abramowitz, analyst with Argus Research Corp.

Less than one-third of Rockwell's revenues now come from military items, she noted. That portion of its business has been hard-hit, it is true. But the company has also suffered from a slowdown in the car industry, for

which it manufactures disc brakes, axles and other components.

"Your Rockwell shares are fairly priced," said Abramowitz. "The stock price won't be picking up a lot of momentum over the next several quarters, so I think you should wait and see what the economic recovery brings."

Q. Each year our investment in ConAgra seems to get better. But will its good fortune continue in light of the economy?

A. Good fortune, indeed. Good fortune has had little to do with the success of ConAgra Inc. (around $44, NYSE), the food-processing, agricultural-product and food-product firm, but excellent management and growth rates have had everything to do with it, said Roger Spencer, analyst with PaineWebber Inc.

The company has enjoyed annual earnings growth of 17 percent for 15 years, weathering recessions and periods of inflation. It is the fastest-growing food company and the second-largest in terms of sales. Spencer estimates its growth rate will slip slightly, to 14 percent, over the next three years, although it does have a possibility of doing better than that.

"ConAgra sells fertilizer to the farmer and processes hogs for butchering, as well as selling Butterball turkeys and Orville Reddenbacher popcorn to consumers," explained Spencer. "The company does it all, and does it all well."

Q. I have 134 shares of Continental Steel Corp. Can you give me information on the status of this stock?

A. Continental Steel Corp., known as Penn-Dixie Industries until its name change in 1982, filed for bankruptcy reorganization in 1986, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm. The firm was later liquidated, leaving your investment with no value.

vTC Q. I am 70 years old, going on 71, and have an individual retirement account that I don't need to use. I would like to leave my IRA alone and give it to the designated beneficiary, my son. Can this be done?

A. Any person over 70 1/2 years of age must begin to receive distributions from his IRA, even if it is a minimum distribution, said Judy Thorp, retirement specialist with Grant Thornton.

Distributions are based on your IRA balance and actuarial tables. They must begin by April 1 of the year following the year you reach 70 1/2 , she said.

"Since you designated your son the beneficiary, the distributions will begin from age 70 1/2 until your death," added Thorp. "Then, the amount will be distributed in the same schedule to your beneficiary until the balance is depleted."

Q. I am selling my small hair salon business that I started with just $100. I am selling it for $30,000. What kind of taxes, if any, do I pay?

A. In the selling of the assets of your business, such as physical assets, good will and business name, your tax basis is determined by the original cost of the business minus the purchase price, said Robert Greisman, tax partner with Grant Thornton. In your case it would be the $100 original cost, minus the purchase price of $30,000, making your taxable gain $29,900.

"The value of your hard assets and intangible assets will determine the tax you pay," explained Greisman. "For profits made on good will, you pay a capital gains tax, while for profits made on hard depreciable assets you pay ordinary income tax."

Q. What is your opinion of Nucor Corp.? This company has had fantastic sales and earnings.

A. Nucor Corp. (around $73, NYSE) is the profitable exception to the rule in the troubled steel industry and therefore well worth holding, said Richard Wholey of Chicago-based Wayne Hummer Co.

Market share gains, efficient operations and little debt will permit this mini-mill to prosper during an economic recovery. However, all this is well-known in investment circles, and Nucor's stock price has held up well.

"Hold on to your existing shares, but I'd wait for a 10 to 15 percent pullback in price before considering buying more shares," concluded Wholey.

Q. In October of 1987 I bought 10 shares of Eastern Utilities Associates. From that point, the stock has gone up some and down some. Should I move on to something else?

A. Eastern Utilities Associates (around $19, NYSE), an electric utility in southeast Massachusetts and northern Rhode Island, remains a low quality stock, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

It owns EUA Power, which has a 12 percent interest in the Seabrook nuclear power plant and is in bankruptcy.

"There are many other stocks with better prospects for growth and dividend enhancement than Eastern Utilities," concluded Conway.

P Andrew Leckey answers questions through the column. Address 1/2 inquiries to Andrew Leckey, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill. 60611.

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