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Dependable Kellogg Co. shares can provide healthy investment


Question: My wife and I are retired and own shares of Kellogg Co. We have liked its dependability. Can the company continue to have good growth? We really can't afford to hold a stock that might be weak.

Answer: This premier company should continue to serve up a bowlful of dependability.

Hold and buy more shares of Kellogg Co. (around $57 a share, New York Stock Exchange), the cereal and convenience food giant, advises Roger Spencer, analyst with PaineWebber Inc. Earnings are expected to increase more than 13 percent both this year and next. Meanwhile, domestic sales volume rose last year and is up this year as well.

Even its latest products are contributing nicely to profits, Spencer notes. New Frosted Bran Flakes, Double Dip Crunch, Low Fat Granola and Cinnamon Minibuns have each captured a significant portion of total market share.

"The name of the game in cereal companies is volume and Kellogg's volume numbers have been healthy," concludes Spencer. "It's a quality investment well worth purchase."

Q. I would appreciate your advice on my 29 shares of MCI communications. Should I hold or sell?

A. Hold the line.

Keep your shares of telecommunications firm MCI Communications (around $33, over the counter) because long-distance revenues typically lag nine months to a year after the economy begins showing strength, says Edward Eyring, analyst with Argus Research Corp. With the economy waffling around as it has been, long-distance profits haven't yet made a comeback, he notes.

"We like MCI and its various marketing programs, but this isn't enough to lure the consumer back to making a lot of long-distance calls," says Eyring. "Hold the stock until it begins performing like the lagging economic indicator that it is."

Q. I recently found some stock certificates for a company called Ilikon Corp. These certificates are more than 10 years old. Have they any value?

A. Ilikon Corp., incorporated in Delaware, had its charter canceled in 1980 due to non-payment of taxes. Its last official address was 7700 W. 79th St., Bridgeview, Ill. 60455.

"The company was declared inoperative and your shares, unfortunately, have no investment value," says Robert Fisher, vice president with the New York stock-search firm of R.M. Smythe & Co.

Q. I have owned shares of Aluminum Co. of America since I can remember. With its price now going up, should I continue to buy shares?

A. Good earnings this year have already translated into a stock price rise for Aluminum Co. of America (around $76, NYSE), yet it is still worth holding or buying, says Clarence Morrison, analyst with Prudential Securities.

"We like this stock and we like what is happening in its industry, so now is the time to get in," counsels Morrison. "Demand for aluminum is stronger this year and inventories have peaked."

Q. Could you refresh my memory as to how much I can deduct for charitable contributions? I've made more contributions than usual this year.

A. You can make cash contributions up to 50 percent of your adjusted gross income to public charities, says Barbara Pope, tax partner with Price Waterhouse.

Appreciated property such as securities that are donated can be deducted up to 30 percent of your adjusted gross income. Lower deduction limits apply when you make contributions to private foundations.

"Deductible contributions can be cash, the fair market value of property or premiums on life insurance policies that have been irrevocably assigned to charities," says Pope, adding that out-of-pocket expenses incurred on behalf of charities, such as travel expenses for volunteer work, can be deducted. "However, the value of the service you donate to a charity is not deductible."

Two Internal Revenue Service publications designed to help are Your Federal Income Taxes (Publication No. 17) and Charitable Contributions (No. 526).

Q. I hold 539 shares of El Paso Electric. I am hoping for a turnaround. What are the prospects for this company? Should I sell and take a loss?

A. Since the current share price is so low, wait until you see the upcoming reorganization plan for El Paso Electric (around $3, OTC) before deciding whether to sell, says Richard Wholey of Chicago's Wayne Hummer & Co.

The company wishes to emerge from Chapter 11 bankruptcy as an independent firm, but Southwestern Public Service has expressed interest in acquiring El Paso's assets.

"Definitely do not purchase more shares now," says Wholey. "Any reorganization plan will result in a dilution of common shareholder equity."

Q. I have 100 shares of Alliance Pharmaceutical Corp. I'd appreciate your thoughts on this investment.

A. Aggressive investors already on board should hold their shares of Alliance Pharmaceutical (around $20, OTC) and await further news about the company, advises Sharon Conway, with A.G. Edwards & Sons.

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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