Q-We inherited some money and would like to invest it. We’ve done research and are considering Dodge & Cox Stock Fund. Is this a good idea?
A-Take a bow. You obviously did your research well.
The $785 million Dodge & Cox Stock Fund was up 17.97 percent over the past 12 months to rank in the upper 4 percent of growth and income funds. Its three-year average annual return was 14.37 percent, placing it among the top 3 percent of its peers.
Run by a management team with a proven knack for finding companies with excellent earnings growth and profitability, this San Francisco-based fund specializes in low-risk stocks selling at a good price.
Many of its stocks are large, established firms that have encountered problems. Largest holdings were recently Dayton Hudson, General Motors, IBM, American Express and Citicorp.
“This is an excellent fund that would make an outstanding core holding in an individual’s portfolio,” advised Jason Windawi, analyst with the Morningstar Mutual Funds investment advisory, which supplied the performance data. “It doesn’t jump on trends, because it wants sustainable profits.”
The “no-load” (no initial sales charge) Dodge & Cox Stock Fund requires a $2,500 minimum initial investment.
Q-A company’s earnings momentum is supposed to be a big deal in determining its stock performance. But it seems there are so many different earnings estimates by analysts. How do you really know?
A-As the managers of the stock fund mentioned in the previous question already know, earnings do provide the fuel for a stock. Predicting them is a somewhat inexact science, though there’s often a consensus as to which companies are likely to show the greatest improvement.
The firms enjoying the highest percentage gains in earnings-per-share forecasts issued by analysts in the past month, according to IBES International Inc., include: Plains Resources Inc., CNS Inc., Digital Equipment Corp., Gardner Denver Machinery Inc., McFarland Energy Inc., Interleaf Inc., Louisiana Land & Exploration Co., Sterling Chemical, Oryx Energy Co., Roanoke Electric Steel Corp., John Q. Hammons Hotels Inc., Tencor Instruments, Telebit Corp., Edmark Corp., Applied Materials Inc., and Cascade Communications.
All are followed by at least five analysts, and, in all cases, Wall Street sees earnings prospects looking up.
Q-I’m interested in safety ratings of the largest life insurance companies. Could you tell me how various companies rank?
A-Though their names all sound impressive and their assets are enormous, the largest life insurers are not all alike.
Here’s how Weiss Ratings Inc. rates the 10 biggest life insurance companies in terms of financial strength, starting with the largest:
Prudential Insurance Co. of America, B-; Metropolitan Life Insurance Co., A-; Teachers Insurance & Annuity Association of America, B; New York Life Insurance Co., A; Aetna Life Insurance Co., C-; Connecticut General Life Insurance Co., C+; Equitable Life Assurance Society of the United States, D+; Northwestern Mutual Life Insurance Co., A+; John Hancock Mutual Life Insurance Co., B; and Principal Mutual Life Insurance Co., B.
In Weiss’ safety rating system, A stands for excellent, B for good, C for fair, D for weak, E for very weak and F for failed. All firms listed have assets of more than $40 billion. Weiss Ratings Inc., 4176 Burns Road, Palm Beach Gardens, Fla. 33410, is generally noted for being somewhat tougher on insurers than are some other rating services.
Q-I have 1,500 shares of Telstar Corp., but can’t locate the company. Is it still in business?
A-Come back down to earth.
The excitement of the original Telstar communications satellite and a subsequent hit record featuring its name unfortunately had no bearing on this particular stock.
The company in Nevada whose shares you hold had its charter revoked in 1990 for failure to file reports and pay fees. Your shares are worthless, sad Barbara Bracco, researcher with the New York-based R.M. Smythe & Co. stock-search firm.
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Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 332, 2124 Broadway, New York, N.Y. 10023.
