Q–I own 200 shares of Waste Management. This stock hasn’t made progress for more than a year. Should I hold or sell?
A–Once a hard charger that financed many a child’s college education, this garbage truck now crawls along at a snail’s pace.
Shares of refuse giant Waste Management are being hurt by a glut of disposal capacity, a disappointing third quarter and the prospect of a charge against earnings in the fourth quarter.
But while no Wall Street analysts have been boosting ratings of the stock lately, it still has enough staying power to rate a consensus “buy,” according to the I/B/E/S International research firm. That includes one “strong buy,” seven “buys” and five “holds.”
“Waste Management used to buy up a lot of smaller companies and it hasn’t been doing it at the same pace lately,” observed Peter Crays, manager of U.S. research with I/B/E/S International.
Earnings are expected to decline nearly 10 percent this year, versus a 19 percent growth rate for the overall waste industry. Next year, however, the firm’s expected 20 percent growth should be slightly better than the industry’s 18 percent.
On the positive side, Wall Street is well aware the company is actively trying to improve its prospects and conducting a comprehensive review of its operations.
New chairman and chief executive officer Ronald LeMay, who termed expected third-quarter results “disappointing,” was hired from long-distance carrier Sprint Corp. in July to turn around the company and improve its lagging reputation among investors.
Q–I own shares of American Century Global Gold Fund. Due to the decline in its net asset value, the balance in my account has dropped below a certain level, which means my shares will be redeemed unless I purchase more. What’s your opinion of this fund?
A–These just aren’t glittery times.
Your decision depends on whether you feel gold-mining stocks provide some necessary long-term market diversification, which would make it worth enduring inevitable down periods.
If you’re simply going on recent performance, however, gold-mining stock funds have fared poorly compared to the rest of the stock market. Blame it on the lagging price of gold–lately around $325 an ounce–and its unattractiveness when compared to most other alternatives.
The $342 million American Century Global Gold Fund is down 17 percent over the past 12 months, which ranks near the top one-third of precious metals funds.
Its three-year annualized return is a negative 9.29 percent, just ahead of the bottom one-third of its peers.
The fund was up 81 percent in 1993, a good example of why investing in gold bullion, gold coins or gold-mining stocks is always a highly personal decision. While the precious metal isn’t the inflation hedge it once was, prices at current low levels do appear attractive.
“If you don’t own gold or are underexposed to gold, this probably isn’t a bad time to get that exposure, so long as you’re thinking only of small amounts,” said Mark Wright, senior fund analyst with the Morningstar Mutual Funds investment advisory.
The funds’s relatively large South African holdings have been a negative lately, since mines in that country are high-cost producers closely linked to the gold price. That, along with the country’s political and labor risks, makes them more volatile performers.
The fund has 47 percent of its portfolio in Canadian mining companies, 24 percent in the United States, 18 percent in South Africa, 9 percent in Australia and the remainder in Ghana.
Its top holdings were recently Barrick Gold Corp., Newmont Mining Corp., Placer Dome Inc., Homestake Mining Co., Normandy Mining Ltd., Driefontein Consolidated Ltd., Vaal Reefs Exploration & Mining Co. Ltd., TVX Gold Inc., Euro-Nevada Mining and Freeport McMoRan Copper & Gold.
This “no-load” (no initial sales charge) fund in Kansas City, Mo., requires a $2,500 minimum initial purchase.
Q–I’d like you to address the situation in which banks merge and you find yourself above the $100,000 Federal Deposit Insurance Corp. insured amount. I’m specifically referring to certificate of deposit accounts, which are penalized for early withdrawal.
A–Don’t worry. The government left you some breathing room.
When the banks merge, your deposits from the two institutions will continue to be insured separately for six months from the date of the merger, explained Christopher Hencke, counsel with the FDIC in Washington.
In the case of an existing time deposit, such as a CD, the separate insurance continues until the earliest maturity date after the six-month period.
“The theory is that this gives the depositor time to deal with the fact the banks have merged, and allows time to move money if you’re over the $100,000 limit as a result,” concluded Hencke.
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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.
