Most stocks miss Dow's gains


Near the end of 1991, the Dow Jones Industrial Average was about 3,100. Currently, this most watched of all stock market indicators is near 3,400. The gain in less than five months is almost 10 percent for this average, which reflects the share price changes of 30 large U.S. corporations.

Much broader-based Standard & Poor's averages have moved little in those five months; in fact, the most popular, S&P;'s 500, is actually down between 1 percent and 2 percent.

In general, stock prices haven't moved ahead this year. One needs to look at prices of companies such as Martin Marietta of Bethesda, which was 57 1/2 five months ago and 52 1/2 now; Avemco Corp. of Frederick, between 25 and 26 both periods; and even Bethlehem Steel, which is one of the 30 Dow Jones Industrials, 14 1/2 in December and 1/4 better in May.

Of course, there are notable exceptions. Towson-based Black & Decker has increased from 17 1/2 to 26, up almost 50 percent thanks to improved earnings and finances, and Procter & Gamble, a Dow Industrial, up from 92 to 104 as earnings also increased.

The point is that averages are often quite misleading and are not the all-important guides to trading that many investors think they are. Both buying and selling should be based primarily on how the individual companies are doing. The Dow Jones Industrial Average's rise, and with it a bullish feeling about the stock market, has been fueled this year by gains in a few stocks such as Disney, Sears, J. P. Morgan, Goodyear, United Technologies and Procter & Gamble.

Stocks that fail to move upward are generally a drain on the earning power of the funds invested in those stocks. For most companies, dividends produce returns of 2 percent to 3 percent, which is several percentage points under bond yields. It is growth in share prices that can make the stocks worthwhile. Therefore, investors should keep their eyes on the earnings strength of the individual companies. Eventually, that will not only affect the share prices but will govern them, to a large degree.


The Dart Group, headquartered in Landover, is a holding company that includes controlling interests in Trak Auto and Crown Books, two businesses founded by the family that controls Dart, the Hafts. It also includes approximately half-ownership of the privately owned and growing Shoppers Food Warehouse retail chain, along with real estate and financial holdings.

A few years ago, the Haft family, after selling its Dart drug store chain, made a lot of money by threatening to acquire large companies, then eventually selling their own shares in those companies at bid-up prices. The one big mistake was Dart's bid to take over Dayton Hudson, a large retailer, at just about the time of the stock market collapse in 1987.

At its peak several years ago, Dart Group's price in over-the-counter trading was 178. Now, the price is under 70 but still a hefty 20 times earnings.

Crown Books has been performing well but its share price, at 18 1/2 , remains under its initial offering price in the mid-1980s, as does Trak Auto, whose earnings are floundering. Neither Crown nor Trak has ever paid a dividend, and Dart Group's own payout has remained at a mere 13 cents per share annually for many years.

Dart has never been a shareholder-oriented company. Not only has the cash disbursement been meager, the corporation has not paid dividends in stock either. What it does do is pay million-dollar-plus salaries to the father-and-son team that runs the company. And despite its substantial size, news about the firm's intentions has always been sparse.

Even though the Hafts appear to be aloof from their shareholders, they do know retailing, having created nationwide book and auto supply chains and moved Shoppers Food Warehouse into third place, behind Giant and Safeway, in Washington-area food sales. Investing in their expertise is worth considering.

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