Q–I hold 200 shares of Bre-X Minerals. While I know the company was delisted from the Toronto Stock Exchange for falsifying mineral assays, what’s the latest word on it? Is it defunct or bankrupt?
A–Bre-X Minerals Ltd., the now-bankrupt Canadian company responsible for the fraudulant gold “discovery” in Busang, Indonesia, is in limbo. Its stock, which once boasted a total market value of $4.5 billion, remains worthless.
As might be expected, lawsuits abound. Most recently, Deloitte & Touche Inc., the firm’s bankruptcy trustee, sued former Bre-X vice chairman and geologist John Felderhof for $2.1 billion and won a court order freezing his assets in the Cayman Islands.
The Ontario Securities Commission in Toronto says there’s “absolutely no trading” in the once high-flying securities of Bre-X and no secondary market, either.
“After Bre-X was delisted on the Toronto Stock Exchange on May 7, 1997, there briefly was over-the-counter trading on the Canadian Dealing Network, but it was halted there as well,” said Paul DeSouza, manager of market operations for the OSC.
Of course, so long as the company exists as a legal entity, it could conceivably come to life again one day if it somehow remedies its deficiencies and once again is in good standing, DeSouza added.
“While some Bre-X certificates were supposedly selling in Canada for $10 to $30 apiece (as collectibles) after the story hit, that phenomenon has worn off and they’re now completely worthless,” concluded Robert Fisher, president of the Robert D. Fisher & Co. stock-search firm in Cliffside Park, N.J.
Q–I am new to the investing world. I have a small amount of shares in the Baron Asset Fund. My initial investment grew tremendously in one year. Do you see it growing more, or should I sell and put it into another fund?
A–Some advice for a new investor: Don’t jump out of an investment simply because it’s already done well for you, but instead stay the course for a while.
Your fund is blessed with outstanding stock picker Ron Baron. The only potential downside is that assets have grown to $4.5 billion. As a result of this imposing portfolio size, it has has been drifting from strictly small-company stocks to include midcaps as well, which may not provide quite as explosive growth.
Baron Asset Fund gained 34.95 percent over the past 12 months to rank in the upper quartile of all small growth company funds. Its three-year annualized return of 28.86 percent puts it in the upper 16 percent of its peers.
“Ron Baron is very familiar with management of the companies whose stock he owns, he is reasonably cautious and more of his bets have paid off than haven’t,” noted Michael Stout, equity fund analyst with the Morningstar Mutual Funds investment advisory.
Its top sectors were recently media and entertainment; amusement and recreation; health-care services; hotels and lodging; and real estate and real estate investment trusts.
Baron Asset Fund is a “no-load” (no initial sales charge) fund requiring a $2,000 minimum initial investment.
Q–I retired from Baxter International Inc. with 7,500 shares acquired through the employee purchase plan. I’m concerned about the price-to-earnings ratio it carries. What’s your opinion of the stock?
A–This world-leading medical technology manufacturer reported a 15 percent gain in profits in its fourth quarter that satisfied analyst expectations.
In a positive step toward the future, Vernon Loucks Jr., chairman and chief executive officer, recently announced a management succession plan under which 43-year-old Harry Kraemer Jr., company president, will add the title of chief executive officer at year’s end. Kraemer is credited with improving Baxter’s cash flow, financial discipline and stock performance in recent years. Loucks will remain chairman of the company’s board of directors.
Baxter International stock is currently a consensus “buy” from Wall Street analysts covering it, according to the I/B/E/S International research firm. That includes five “strong buys,” six “buys” and three “holds.”
The company is expected to turn in an 11 percent earnings growth rate in its current fiscal year, versus 33 percent for the overall medical supplies industry. Next year’s 13 percent increase compares to 33 percent industrywide.
Baxter, which recently agreed to acquire biotechnology company Somatogen Inc. for at least $190 million in stock, focuses on cardiovascular, kidney dialysis, biotechnology and intravenous systems.
Its products include tissue heart valves, blood transfusion systems, treatments for hemophilia, home dialysis systems, heart surgery equipment and more than 800 IV products. It’s working on new products such as a human blood substitute and a sealant for clotting blood. Foreign markets account for half the company’s sales.
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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
