Q–I’ve been considering the purchase of shares of Electronic Data Systems in a custodial account for my 12-year-old granddaughter. What’s your opinion of this stock?
A–This information-technology services firm is trying hard to improve, and has significant restructuring underway. However, it’s still not a sure thing. Invest only if you’re convinced you’re receiving a bargain in its depressed shares.
Driven to glory years ago under the gritty leadership of Ross Perot, Electronic Data Systems has had an especially hard time of it since it was spun off from General Motors in June 1996.
It currently receives a below-average “hold” consensus recommendation from Wall Street analysts covering it, according to Boston-based First Call Corp.
“Fourteen of the recommendations are either holds or sells, with is pretty bearish,” observed Charles Hill, director of research for First Call, adding that the remaining opinions consist of three strong buys and two buys.
EDS net income in the second quarter was $22.9 million, or five cents a share. While that reversed a year-ago loss of $326.5 million, or 65 cents a share, it was below analyst expectations. There’s been a general flattening of earnings in recent years, Hill noted. Analysts have made a number of downward earnings revisions in the past month, their projections for the current year now ranging from $1.70 to $1.95 a share.
This manager of computers, networks, information systems and related businesses earlier this year began a restructuring aimed at eliminating $750 million in annual costs by 1999. It has cut 3,000 jobs and is considering additional cuts. It consolidated some business units and streamlined internal computer and networking operations.
Q–Over the years, I’ve collected a number of Federal Reserve notes that have on them the words “Will pay to the bearer on demand.” Most are 1950 series and some are 1934. Are these of any value other than face value?
A–Sorry. While it’s true that some large-sized Federal Reserve notes issued before 1929 have collector value, your conventional-sized notes have no premium associated with them.
“Most anything that’s been in circulation is basically spending money, since the condition of the note is crucial,” explained David Harper, editor of the Bank Note Reporter publication, 700 State St., Iola, Wis. 54990 ($29.95 annually).
Prime examples of collector value, Harper pointed out, are the Federal Reserve notes issued during World War II that have “Hawaii” printed on their back. That was done in case Japan conquered the island and the U.S. government had to demonitize the notes. In fine condition, Hawaii notes are worth around $21; in crisp uncirculated condition they command as much as $250.
Also of collector interest are so-called Star Replacement Notes, which have a star printed next to the serial number. These are specially marked replacements for notes found to have printing errors, such as missing ink on one side or improperly located serial numbers. There are star replacements in every note series.
Prices for the various notes can be traced through guides in public libraries, such as the Standard Catalogue of United States Paper Money, published by Krause Publications and now in its 16th edition ($24.95).
Q–For the past five years, I’ve been making monthly deposits to the American Century Equity Growth Fund. It doesn’t appear to be performing as well as I’d like. What do you think of this fund?
A–This fund’s computer really has its number-crunching act together.
You really shouldn’t be complaining about results of this fund, which employs computer screens to help trim a universe of 1,500 large-capitalization U.S. stocks to 150 selections. Its proprietary model has not only outperformed the Standard & Poor’s 500, but has been less risky than that broad index as well.
The $552 million American Century Equity Growth Fund is up 44 percent over the past 12 months to rank in the top six percent of large value stock funds. Its three-year annualized return is 27.62 percent, placing it in the upper four percent of its peers.
Since less than 10 percent of its portfolio decisions are qualitative ones made by managers rather than through computer screens, there’s little reason to be concerned about a recent changeover in portfolio managers to Jeffrey Tyler and William Martin.
“This is a potential core holding for investors with a variety of time horizons who want broad stock market exposure and opportunity to outperform indexes,” said Christine Benz, equity analyst with the Morningstar Mutual Funds investment advisory.
The fund has little portfolio turnover. Its heaviest group concentrations were recently in financials, industrial cyclicals, services and technology.
This “no-load” (no initial sales charge) fund based in Kansas City, Mo., requires a $1,000 minimum initial investment.
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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.
