Q–The other day my wife and I dined at the Lone Star Steakhouse & Saloon. It was packed. We liked the food and service. We’d appreciate your comments on the latest consensus for the stock.
A–While this column doesn’t qualify as a food critic’s corner, Lone Star Steakhouse & Saloon Inc. and its casual “Texas roadhouse” image has attracted some rave reviews from Wall Street.
Based in Wichita, Kan., the company owns and operates a chain of more than 200 mid-priced, full-service restaurants, most of which are owned by the company. They specialize in mesquite-grilled steak, ribs, chicken and fish.
The number of Wall Street analysts giving recommendations on its stock since March has risen from 6 to 10.
“If an analyst is going to pick up coverage of a smaller company, it’s usually because there’s a belief it’s going to be a good opportunity now or in the future,” observed Charles Hill, director of research for Boston-based First Call Corp.
The analyst consensus is currently a “buy,” based on six “strong buy” ratings and four “holds,” according to First Call.
Those “holds” are likely based on the chain’s disappointing same-store sales results thus far this year and a generally negative attitude toward near-term prospects of all restaurant stocks.
The earnings estimate for this year is $2.02 a share, a 24 percent increase from last year, and next year should see a 22 percent increase.
Lone Star’s consensus long-term growth rate is 25 percent, significantly higher than the 15 percent rate for the restaurant industry as a whole.
Most of Lone Star’s restaurants are located in the mid-Atlantic states and Florida. It has also entered Australia and Guam, though it divested its interest in a European joint venture last year. Its upscale new Del Frisco’s Steak House and Sullivan’s Steakhouse concepts are seen as potential expansion vehicles.
Q–I own a few mutual funds offered by Prudential. I never see them mentioned. What do you think of Prudential Equity Fund, B Shares? It has made me money, but doesn’t seem to do as well as index funds. What do you think?
A–This fund is picky. Perhaps a little too picky.
It prefers to invest in companies whose price-to-book ratios are just half that of the Standard & Poor 500 Index. As a result of such selectivity, it missed out on some opportunities in the raging bull market that boosted so many stocks.
The $4.9 billion Prudential Equity Fund is up 23.52 percent over the past 12 months to rank in the lower 10 percent of large-capitalization value funds. Its three-year annualized return is 21.53 percent, placing it in the lower quartile of its peers.
“The fund has encountered difficulty finding inexpensive stocks with high enough quality to meet its valuation measures, and its large cash position (recently 24 percent) has held back returns,” pointed out Scott Cooley, equity fund analyst with Morningstar Mutual Funds.
Thomas Jackson, portfolio manager of Prudential Equity Fund since 1990, has more than 30 years of experience as a strict value investor.
The Class A shares have a 5 percent “load” (initial sales charge), while your B shares have a declining redemption fee. Both require a $1,000 minimum initial investment. Class C shares, with a redemption fee only the first year, require a $5,000 investment.
Q–Can you tell us what the value of a 1934 baseball signed by Babe Ruth would be?
A–The “Bambino” remains a beloved figure in the hearts of baseball fans. While there could be as many as 100,000 baseballs signed by George Herman “Babe” Ruth of the New York Yankees, they’re quite valuable with collectors.
It goes beyond his dramatic slugging ability. There are lingering images of that big hulking fellow, who experienced a very difficult childhood himself, standing happily outside Yankee Stadium for hours after games to spend time with young fans. That outweighs his other reputation as a hard-drinking carouser.
Your baseball with Ruth’s signature, if it’s in excellent condition, could be worth at least $3,000 to $4,000. If it’s not an official American League baseball, however, the value drops by 20 percent, according to Joshua Evans, chairman of Leland’s Auction House in New York.
The quality of both the ball and signature dictate price. There is a wide range.
“A mint-condition Ruth-signed baseball with a slight flaw sold in our recent auction for $12,500,” pointed out Evans. “However, if the baseball is in poor condition, it could be worth only $500 or less.”
Another consideration is whether there’s more than one signature on the ball and exactly whose signature that is. For example, a ball with the autographs of both Lou Gehrig and Ruth could be worth considerably more than one with Ruth alone, concluded Evans.
———-
Andrew Leckey, an anchor on the CNBC financial cable television network, answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450 or by e-mail at successinv@aol.com.
