Utility Player: A Fund at the Top of Its Game
Prudential-Bache Utility Fund is the leader in the utility fund sector. Since 1987, the fund has been run by Warren Spitz. In a recent interview, Spitz discussed the future of the group and named the utilities that he believes will move ahead. From a long-term perspective, the personnel at Prudential-Bache are moderately positive on the outlook for utilities. For utilities in general, a trend return is expected in the low double digits. Prudential-Bache has significantly increased its weighting in electric utilities in recent months; the fund is nearing 65%, in terms of equity weighting. The fund has about 25% in telephones, and the balance is gas issues. ALLTEL has shown the best earnings and dividend growth of any medium or large-sized phone company over the past 5 years.
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Rescigno, Richard
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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Suddenly, Life’s a Beach: The Sizzling Summer of 1989 Has Been Fun, Fun, Fun
Mutual fund investors experienced a profitable summer in 1989. A soaring stock market and falling interest rates combined to produce gains in almost every sector in the 2nd quarter. Even the quarter’s losers, gold funds, obtained positive results. The best performers, by far, were growth funds. Fund companies across the board report a reawakening of customer interest in equity funds. Investors are choosing stock funds at a slow pace, and buyers seem to be adhering to the most conservative, solid stock funds. One stock that fund manager Stuart Roberts believes has an attractive outlook is Mobile Telecommunications Technologies. Another favorite is toymaker Tonka Corp. Health funds were the winners in 1989′s first 7 months. The least popular funds in July 1989 were fixed income. The Lipper Gauge lists all the long-term equity and taxable fixed income funds that Lipper Analytical Services covers.
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Eaton, Leslie
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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Smooth Operators: Some Small-Caps Do Well in Boom and Bust
Small-capitalization stocks are attracting attention, as evidenced by the National Association of Securities Dealers Automated Quotes Composite index’s year-to-date gain of almost 20%. Indeed, some of 1989′s exceptional mutual fund performances have been turned in by small-company growth funds, such as Alger Small Capitalization. However, not only do small-cap stocks themselves tend to be volatile, but the funds investing in them tend to be small. A major move in just one or 2 positions, up or down, can have a huge effect on small fund’s total return. Furthermore, when they face redemptions, small funds have less cash – and less choice about which stocks to sell to raise the cash. Some small-company growth funds have demonstrated that they can avoid the boom-and-bust syndrome. According to a screen conducted by Lipper Analytical Services, there are 7 such funds. Some examples of steady-going small caps are the $739-million Acorn Fund, Alliance Quasar, and Pennsylvania Mutual.
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Gregor, Anne
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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Sky’s the Limit – II: Why Kevin Murphy Still Likes the Airlines
Kevin Murphy follows the airlines for Morgan Stanley. He was very bullish on selected carriers, including Delta and United Airlines (UAL), in early July 1989. In a recent interview, Murphy said that one reason American Airlines’ and Delta’s stocks are strong is because the bid for UAL shows that banks are willing to lend money for restructurings in this industry. Numerous airline stocks have gone up because of takeover rumors. In a press release, Pan Am says it will consider a bid for United if UAL’s board of directors decides to put the company up for sale. Morgan Stanley is telling its clients that, should a restructuring occur at UAL, it will happen in excess of $250 a share. Pan Am will be among the contenders, along with some financial buyers.
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Welling, Kathryn M.
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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Looking Good: Deb Shops Fashions a Neat Gain in Earnings
The women’s apparel business seems to be improving. As demand rises, the wave of inventory reduction and price cutting that flattened profit margins appears to be ebbing. Deb Shops Inc. never suffered from the industry’s recent problems and stands out for its robust finances. Launched in 1988, a program of tight inventory control is continuing to pay off, and the retailer is pressing ahead with aggressive expansion. Deb Shops, which specializes in junior sportswear, is stepping up its efforts in the private-label business. The company has reduced costs by importing more goods itself and by expanding its merchandising horizon from regional malls to select strip shopping centers. The firm’s long-term debt equals less than 3% of its $71 million in equity, which has increased 10-fold in the past decade.
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Wyatt, Edward A.
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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J. P. Industries Inc.: Flow of New Products Steers It to Market Niches; Spiegel Inc.: In Quest of Growth, It Seeks Further Acquisitions
John Psarouthakis instituted a clear-cut growth strategy for his company, J. P. Industries Inc.: Acquire underperforming companies, restructure, modernize their facilities, and focus on their most profitable and promising products. In the automobile market, the firm finds niches with the assistance of a flow of new products. For example, J. P. Industries landed fresh business from developing engine components for Ford, Volvo, and Honda. The management of Spiegel Inc. is setting $5 billion in revenues as its target in 1989. Spiegel is absorbing the 1988 purchases of Eddie Bauer Inc. and Honeybee Inc. Spiegel paid $262 million for Eddie Bauer, a retailer of men’s and women’s sportswear and outdoor equipment, and $23 million for Honeybee, a retailer of better priced women’s apparel. Spiegel President and Chief Executive Officer John J. Shea has shifted the firm’s marketing focus to the upper 30% of US households.
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Byrne, Harlan S.
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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Closed Encounters: Takeover Battlefield Is Getting Crowded
Closed-end funds have grown 6-fold in 10 years. These funds are fundamentally different from the targets of the “big-time” raiders. Steven Samuels of Drake Capital says that closed-end funds were created to generate a number of fees on Wall Street. Ron Olin, president of Deep Discount Advisers, observes that, in the past year or so, a record 1/4 of the equity funds are being targeted by 17 different raiders. The Securities & Exchange Commission is proposing some changes to protect the investor. For example, the agency recommends changing the term “underwriting discount” to “sales load” in prospectuses. Investors, however, rarely read prospectuses about funds. Olin says that, of the most recent 8 attempts to liquidate or open end equity funds, only 3 have succeeded to date. He estimates that some raiders have lost money on deals in which legal and other fees have more than claimed the profits.
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Miller, Nancy
Full text: [Barron's National Business and Financial Weekly] Aug 14, 1989
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Airline Leveraged Buyouts to Have Far-Reaching Impact
Three airlines became the subjects of Securities & Exchange Commission filings recently, and stock prices of nearly all airlines soared as investors rushed to take positions. United Airlines, USAir, and Midway Airlines all were notified that investors had acquired more than 5% of their outstanding stock. All 3 stocks rose sharply on increased volume, and other airline shares rose as a group. Since the deregulation of the airline industry in 1978, the proliferation of new airline companies led to the widespread use of takeovers to eliminate competition and generate growth. Airlines are now attractive for 3 reasons: 1. The consolidation of the industry has meant that fewer companies control larger market shares, resulting in more sustained profitability and cash flows. 2. Airlines now have enormous amounts of value, thus, with used aircraft selling at premium prices, acquisition debt can be retired more easily with asset sales. 3. Nearly all other industries already have restructured, leaving the airlines as one of the few remaining opportunities to realize major gains.
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Kernstock, Nicholas C.
Full text: [Aviation Week & Space Technology] Aug 14, 1989
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Country Watch: Japan: Banks See Future Growth In Foreign Pa
Business prospects for Japanese banks are headed for a downturn in fiscal 1989. At the end of fiscal year 1988, the City Banks of Japan posted an average recurring profit growth only slightly more than 3%. The 13 City Banks are rapidly closing the gap between their capital adequacy ratio of 2 years ago and the standards set by the Bank for International Settlements to be reached in 1992. This will gradually release them from the constraints of assets expansion and strengthen their foundation more in the long run. The European presence of the 13 City Banks kept growing throughout the first quarter of 1989. Japanese banks have also been entering the market in Southeast Asia. Sanwa Bank’s goal to be first among Japanese banks in profits by March 1990 appears unlikely. However, in Hong Kong, the Peoples’ Republic of China, Thailand, Malaysia, and Indonesia, Sanwa is ahead of its country rivals. Japan’s top 4 securities firms held a combined 41% of the total market share of Eurobond issues for the first 6 months of 1989.
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Chowdhury, Amitabha
Behrmann, Neil
Full text: [Asian Finance] Aug 15, 1989
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Summer Months Nourish Timber Company Stocks
Dropping interest rates and rising wood product prices have made for a surprising July and August for Willamette Industries Inc. and Louisiana-Pacific Corp., Portland’s largest forest products companies. Usually the two companies’ stock prices move with the speed of Northwest glaciers. Absent a regional recession or an all-out economic boom, the stock prices of the lumbering giants generally trade in a fairly narrow range. But since the end of June, both companies have seen their stock prices climb steeply. Willamette Industries’ stock has shot up 18.4 percent since the end of June, closing at $50.75 per share Aug. 15. (excerpt)
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Gauntt, Tom
Full text: [The Business Journal] Aug 21, 1989
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Central Newspapers Inc. Shareholders Offer Stock to Public
Indianapolis-based Central Newspapers Inc. — parent of Phoenix Newspapers Inc., publisher of the Arizona Republic, Phoenix Gazette and Arizona Business Gazette — plans to sell $61 million to $72 million in an initial public offering of its class A common stock. According to a prospectus filed with the Securities and Exchange Commission, the offering consists of 3,592,800 shares that will carry an initial asking price of $17 to $20 a share. Three million shares will be offered in the United States, with the remaining 592,800 to be offered concurrently outside country. (excerpt)
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Anonymous
Full text: [The Business Journal] Aug 21, 1989
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Graham’s Continued Stock Surge Baffles Analysts
Since mid-July, Graham Corp.’s stock price has had investors scurrying to buy and analysts scrambling to explain why. Over the last month, the company’s stock has nearly tripled, jumping from about $11 a share to more than $32 a share last week. “It’s been a real surprise to us,” said Alvin Snyder, Graham’s vice president for finance. “Our previous high had been about $16 a share.” Joseph Rulison, vice president of Marsh Capital Management Inc., said investors began to take interest in Graham following its second-quarter earnings report. Prior to that report, almost no one on Wall Street followed Graham’s stock, which totals only about 940,000 shares outstanding. (excerpt)
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Johnston, Phil
Full text: [Rochester Business Journal] Aug 21, 1989
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Nasta Now Bringing Toys Out of the Box, Onto TV
Arriving at work on a recent Monday morning, Gerald Steinberg was greeted by a 38-page memo faxed to him from the company’s Hong Kong plant. After the list of items which had been shipped was a notation stating that the Batman sunglasses would be late because a generator had broken down. Such are the problems Steinberg has to deal with as executive vice president of Nasta International Inc., a toy manufacturer with offices in Hong Kong, New York and Philadelphia. Although Nasta has been profitable every year since being formed in 1968, nobody has ever confused the company with the likes of Fisher-Price or Mattel. (excerpt)
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George, John
Full text: [Philadelphia Business Journal] Aug 21, 1989
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Institutions Enjoy Airline Ride
A number of institutional investors are watching as UAL Corp., United Airlines’ parent, and the other airlines’ stocks rise in response to the recent takeover mania in the industry. Investors had staked positions in the airlines in anticipation of strong earnings from the consolidation of the deregulated industry. However, earnings were stronger than expected during the first half of 1989, which prompted a dramatic run-up in airline stocks and a flurry of investment activity and takeover speculation among the nation’s 4 largest carriers: 1. UAL, 2. Delta Air Lines Inc., 3. AMR Corp., owner of American Airlines, and 4. USAir Group Inc. UAL has been the focus of the investment community since the recently publicized conditional buyout offer, worth about $5.4 billion, from Marvin Davis. Investor optimism is being tempered by the cyclical nature of the industry, which could make debt service payments from a leveraged buyout unwieldy in an economic downturn.
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Vosti, Curtis
Full text: [Pensions & Investment Age] Aug 21, 1989
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Finally a Profit, but Grow May Have to Shrink Anyway
Troubled by a chemical warehouse fire, a friendly deal gone sour and eight straight quarters of losses, President Russell Banks had reason to cheer when Manhattan-based Grow Group Inc. showed a profit. With fourth-quarter income of $1.2 million, or 10 cents per share, compared with a loss of $695,000 from continuing operations in the prior-year period, Mr. Banks says Grow is on the verge of a turnaround. Quarterly revenues were $120 million. But the day after Grow’s announcement last week, Wall Street remained unimpressed. The $383 million chemical and paint company’s was stock at 11, down by 25 cents from the week’s high of 11 1/4. (excerpt)
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Temes, Judy
Full text: [Crain's New York Business] Aug 21, 1989
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Making a Virtue of Restlessness: Bank-Software Titan SEI Is Exploring Lots of New Channels
Alfred P. West, Jr., chief executive officer (CEO) and founder of banking software and services company SEI Corp. (Wayne, Pennsylvania), is a great believer in flux. This is a good thing because SEI is currently going through some tough times. Business is off in key areas, and earnings are flat. West has rapidly built SEI into a leader in trust accounting through a series of savvy diversifications. Automating trust departments, which are among the most hidebound areas of finance, has proven to be particularly lucrative. After registering as a broker-dealer in the early 1980s, the company began selling money-market mutual funds just in time to benefit from an interest rate boom. Things have soured since then, in part because of the 1987 stock market crash. Erratic earnings may be the inevitable consequence of West’s management style. West argues that it is impossible to have all smooth runs and no rocky stretches. To be sure, this passion for flexibility poses risks, but SEI has learned from its CEO to thrive on change.
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Weber, Joseph
Full text: [Business Week] Aug 21, 1989
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Brokers’ Stock Climb Despite Poor Earnings
Believing that the soft property-casualty insurance market will harden next year, investors are starting to buy insurance brokerage stocks despite continued poor brokerage earnings. Analysts note that brokerage stock prices have increased to record or near-record highs in the past several weeks, even though brokers reported sub-par earnings in the first half of 1989 and revenue growth pales in comparison with 1987 levels. For example, while the New York Stock Exchange composite rose 8% between July 1 and August 15, the stock values of Hilb, Rogal & Hamilton Co. increased 31.7%; Alexander & Alexander Services Inc. increased 14.6%; Arthur J. Gallagher & Co. rose 15%; Corroon & Black Corp. grew 10.9%; and Marsh & McLennan Cos. Inc. rose 6.9%. An exception to the brokerage stock boom has been Frank B. Hall & Co. Inc., which reported large net losses in the 2nd quarter and first half of 1989.
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Collins, Linda J.
Full text: [Business Insurance] Aug 21, 1989
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You Gotta Believe: Otherwise, Carrington’s Stock Price Is a
There are few more impressive instances of the power of faith on Wall Street than Carrington Laboratories Inc. (Irving, Texas). For years, the company has been developing a drug called Carrisyn, which is derived from the aloe vera plant. So far, Carrington has yet to earn government marketing approval for its drug, much less its first cent. Since the end of 1988, Carrington’s shares have appreciated by 140%. Despite the company’s exuberant claims and the rocket-like rise of its shares, it is by no means clear that company will ever win approval from the Food & Drug Administration to market Carrisyn. In addition, Carrington is the target of a lawsuit that levels some very ugly charges against the company. The lawsuit apart, the road ahead for Carrington looks anything but smooth. For one thing, the company’s finances are not exactly robust. Also, the medical community remains skeptical that an aloe-derived substance is an effective drug.
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Savitz, Eric J.
Full text: [Barron's National Business and Financial Weekly] Aug 21, 1989
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Tunnel Vision: Labor Strife Clouds the Outlook for Coal
Marc Cohen follows the coal industry and domestic oils for Kidder, Peabody. In an interview, Cohen discussed the implications of the recent upheaval in the coal industry. On April 5, 1989, the United Mine Workers went on strike against Pittston Coal Group. Cohen said that there is underlying concern that the Pittston strike will spread. If the strike does erupt on a national scale, it will last at least a month and will be a very crippling event. If this does happen, everyone from the coal producers to consumers will be hurt. Pittston is prepared for a lengthy strike. The company is convinced that the work rules changes, the savings on the health benefits, and, over time, a new esprit de corps that it hopes to develop will lead to higher productivity. Cohen also expressed overall concern about the stock market. He is worried that some of the stocks are being pushed up for the wrong reasons.
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Welling, Kathryn M.
Full text: [Barron's National Business and Financial Weekly] Aug 21, 1989
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Stone Container Corp.: It Whacks at Debt While Reaping Acquisition Benefits
Six years ago, Stone Container Corp. started on an expansion and acquisition spree that has made it the largest producer of commodity paper and packaging products. The firm is number 2 in the entire paper industry, just behind International Paper Co. Chairman Roger W. Stone, the chief executive, likes to attribute much of Stone’s success to a management credo drummed into employees about the importance of innovative and high-quality products, combined with excellent service. He acknowledges that the big factor has been a series of major acquisitions, capped by the $2.7-billion takeover of Consolidated-Bathurst. The Bathurst acquisition does a lot for Stone’s core businesses and also sharply expands Stone Container’s sales. In addition, the acquisition piles on a lot of new debt. Roger Stone is disconcerted about pricing trends. He thinks the industry will try again in early 1990 to boost prices on linerboard.
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Byrne, Harlan S.
Full text: [Barron's National Business and Financial Weekly] Aug 21, 1989
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