Q–My grandmother bought 420 shares of Commonwealth Edison 25 years ago and reinvested all dividends. Is this a suitable investment for someone in her 80s?
A–Recent problems relating to that utility’s nuclear power plants have changed its image somewhat from the more certain “good old days” when your grandmother began buying shares.
In fact, 17 Wall Street analysts over the past month have cut their earnings estimates for energy holding company Unicom Corp., the parent of Commonwealth Edison Co.
The embattled stock of Unicom currently receives only a weak “hold” consensus recommendation from Wall Street analysts, according to the I/B/E/S International research firm. The most recent individual analyst recommendations have been downward.
“When you look at the Unicom growth rates compared to the industrywide average, it just doesn’t look like prospects are all that good,” observed Steven Murray, data researcher for I/B/E/S. “But while analysts don’t think it’s an attractive investment in light of recent problems, it probably is a fairly steady choice that will have pretty decent dividends (with a recent yield of more than 7 percent).”
The Nuclear Regulatory Commission recently proposed fining the firm $650,000 for alleged safety violations involving use of a foam sealant at its LaSalle nuclear plant. Furthermore, three of the eight facilities on the NRC’s latest “watch list” of problem-plagued plants are operated by Unicom’s Commonwealth Edison unit.
While regulators acknowledge that changes the company began instituting in 1993 have improved the performance at some plants, others have declined significantly. Unicom has expressed “every confidence” its efforts launched last year to upgrade its nuclear program will bring results and greater operating efficiencies.
Q–My individual retirement account includes Lord Abbett Affiliated Fund. I’ll be required to start taking distributions in four years. Is this a good fund fit for me?
A–It’s a steady, consistent fund that seeks value.
The $6.6 billion Lord Abbett Affiliated Fund was up 21.45 percent over the past 12 months to rank at the midpoint of growth and income funds. Its three-year annualized return of 18.51 percent placed it in the upper one-third of its peers.
Its portfolio is most heavily weighted in industrial cyclicals and financials. Emphasizing large-capitalization value stocks, its largest portfolio holdings were recently Emerson Electric, Deere & Co., Corning, ConAgra and MCI Communications.
“This fund makes sense as a core holding that offers a good balance of risk and reward, best-suited to a conservative investor with a long-term horizon,” said Michael Breen, analyst with the Morningstar Mutual Funds investment advisory.
Q–I’d like to invest at least $1,000 in foreign markets. How should I go about it?–J
A–There are several effective, popular ways of investing overseas:
– Individual American depository receipts (ADRs), receipts for individual shares of a foreign-based corporation, traded on U.S. exchanges.
– Conventional open-end mutual funds that invest in the stocks of foreign countries.
– Closed-end funds, which pool money to invest in stocks of individual countries or regions and are traded as shares on a stock exchange.
– Stocks of U.S. corporations that do significant business overseas.
“The biggest mistakes in global investing are to fail to diversify, since there really is no one single answer, and to try to follow international trends too closely,” counseled Vivian Lewis, publisher of the Global Investing Newsletter, P.O. Box 1945, Ft. Collins, Colo. 80522 ($130 annually), which follows closed-end funds and ADRs.
It’s also worth noting that a great many open-end mutual funds have the authority to invest in international stocks, even though that capability may not be evident in their names.
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Andrew Leckey, whose new book “The Morningstar Approach to Investing: Wiring into the Mutual Fund Revolution” (Warner Books) is now available in bookstores, answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450.
