Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.invest From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: invest Thu, May 14 1992 Date: Thu, 14 May 92 05:42:12 EDT Message-ID: 05-14 0000 DECISIONLINE: Personal Investing USA TODAY Update May 14, 1992 Source: USA TODAY:Gannett National Information Network MORE GAINS LEFT IN AUTO STOCKS: Auto stocks have been impressive lately - Ford and Chrysler are both up 60% this year, and General Motors is up 40%. Investors may look at such a run-up and say it's about over. But auto analysts generally look for impressive gains from the Big Three for at least another year. This rationale is based on history, which shows that when the nation emerged from recession in 1982, auto stocks soared. (For more, see special Autos package below.) GOOD ECONOMIC NEWS IGNORED: Investors, apparently waiting to see if the Federal Reserve would move to ease interest rates, shrugged off favorable reports on inflation and retail sales Wednesday. The Dow Jones average of 30 industrials rose just 6.86 points to 3,391.98. The Labor Department said that consumer prices rose a mere 0.2% in April. Retail sales jumped 0.9% in April, the Commerce Department says. DOW 3500 SEEN: Investors, cautious with the Dow near record levels, have been buying stocks but also have been quick to cash in on rallies. While some analysts say the Fed must move on interest rates to keep the rally going, others insist the market will continue to climb. "The impetus will be expectations of higher earnings," says Advest's John Shaughnessy, who predicts a Dow of 3500 by year's end. WARNING ISSUED ON SHIPPER: Slowing coal and grain shipments could be trouble for shares of railway shipping company Burlington Northern, warns C.J. Lawrence analyst Thomas Galvin. He told his company's brokers Wednesday that short-term investors should lock in the stock's recent gains. That stock, which has risen 10% the past three weeks, fell 2 1:4 to $45. Reduced shipments will show up in lower earnings this quarter. STOCK IS A BUY FOR LONG TERM: C.J. Lawrence analyst Thomas Galvin Wednesday lowered his second-quarter per-share earnings estimate for Burlington Northern from $1 to 70 cents. Long term, Galvin is bullish on Burlington and other rail companies, which have been popular this year with investors betting on an economic recovery. Burlington could be in the $50-to-$55 range a year from now, Galvin says. USAIR STOCK OPTION PLAN OK'D: The shareholders of USAir Group Wednesday approved a stock option plan which involves issuing up to 8.1 million shares of common stock to employees, related to the cost reduction program. As announced in 1991, participating employees whose pay has been cut to save money will get options to buy 50 shares of USAir Group common stock at $15 per share for each $1,000 of pay cut. BIG ANNUAL MEETINGS HAPPENING: Thursday sees some big annual meetings. Among the notable events will be Lee Iacocca presiding over Chrysler's annual meeting for the last time as chairman. Also: Ford chief Harold Poling can tell shareholders about factories working overtime; J.C. Penney celebrates the company's 90th anniversary; some Sears shareholders are seeking a larger voice in Sears' decision-making process. GOLD PRICES RISE: Gold prices were higher Wednesday worldwide after falling in Asia. On the New York Commodity Exchange, gold bullion for current delivery settled at $335.60 a troy ounce, up $30 cents. Republic National Bank said gold added $1 an ounce to a late bid price of $335.60. The metal rose in London and Zurich. On the Comex, silver bullion settled at $4.086 a troy ounce, down from $4.089. SPECIAL PACKAGE ON AUTOS: PAST GAINS HAVE BEEN IMPRESSIVE: From the start of 1982 through 1984: GM gained 63%, from about $19 to $31 a share; Ford shot up 250%, from about $4 to $14; and Chrysler, which was on the brink of bankruptcy, increased 700% from $1 1:2 to about $12. Those gains outpaced the overall market by a mile: The Standard & Poor's 500 rose 36% the same three years. STOCKS SEEN OUTPERFORMING MARKET: Analyst Thomas Galvin of C.J. Lawrence is looking for history to repeat itself with the auto stocks, though in a scaled-down fashion. "They should outperform the market for another two years," he says. Galvin expects auto stocks to rise 10% to 15% the rest of this year and again next year. Detroit's tough cost cutting is key to such optimism. SALES HAVE TO IMPROVE: By 1995, the Big Three will have after-tax profits equal to 3% to 5% of revenue, predicts analyst Arvid Jouppi. Ford, which had first-quarter revenue of $24.5 billion, reported net income of $338 million. At 5% of revenue, the net figure would jump to $1.2 billion. To keep stock prices rising, however, sales have to increase. (End of package.) DOW JONES OPENS ON UPSWING: The Dow Jones average of 30 industrials opens Thursday at 3391.98 after closing up 6.86 points Wednesday. The New York Stock Exchange composite opens at 229.44, down 0.01. The American Stock Exchange market value opens at 393.75, up 0.29. The NASDAQ OTC composite opens at 582.38, down 1.58. DOLLAR OPENS DOWN OVERSEAS: The dollar opens down on Thursday. It opens at 0.5501 British pounds, down from 0.5515; 5.4210 French francs, down from 5.4460; 1.6160 German marks, down from 1.6226; and 129.98 Japanese yen, down from 130.38. (As of 3 p.m. Wednesday. Source: First American Bank of New York.) 24-HOUR TELEPHONE INFORMATION: USA TODAY Money Hot Line. 95 cents a minute. 1-900-555-5555. Personal Investing Editor: William Snoddy. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM