Q: I am concerned about the weakness...
Q: I am concerned about the weakness in Occidental Petroleum. Is there much chance of growth in the short term? Denver
A: Occidental Petroleum’s stock hasn’t exactly been weak, but it hasn’t been strong either. Its shares have traded between $26.25 and $31 in the past year. Right now, the stock is near the low end of that range. And without even going back to check, I’d guess that the high came at a time Wall Street was predicting that the company’s 91-year-old chairman, Armand Hammer, would relinquish control--either voluntarily or involuntarily.
For the record, Wall Street analysts are expecting Occidental to earn $1.16 a share this year, up from last year’s $1.03.
But it’s been a while since anyone paid a whole lot of attention to Occidental’s profits. Speculators on Wall Street grabbed hold of this stock a long time ago--pushing it up whenever it looked as though Hammer might be sick enough to have to approve the sale of Occidental. “If Hammer checks into a hospital to have a wart removed, this stock goes up,” says Alan Gaines of Gaines, Berland Inc., an investment firm that specializes in energy companies. Gaines says Occidental’s biggest problem is that it gets so much of its revenue right now from the sale of chemicals. And Occidental isn’t an integrated oil producer. That means the company finds oil but doesn’t transport or refine the oil. So when oil prices drop, Occidental--the producer--is hurt. And the company doesn’t receive the benefits that a refiner would under those market conditions.
Q: I own a few hundred shares of Charming Shoppes and have been buying more when its price drops. I bought some at $15, $13, $12 and $10. Am I chasing a loser? Or is this former darling of Wall Street merely out of favor? Allentown, Pa.
A: Charming Shoppes, which operates most of its 1,000 clothing stores in the Northeast, appears to simply be out of favor. But the more important question for someone like yourself: How long will it remain out of favor?
Kevin Moore, an analyst with Ohio Co., says he thinks that a year from now Charming Shoppes’ stock, which trades over-the-counter, will be selling for $12 to $15 a share. That won’t help you score a profit in this stock, but it could help you erase some of the losses you now have.
Charming Shoppes is a solid company, according to analysts. Its recent problems have more to do with the severe discounting that retailers in the Northeast experienced last Christmas. That problem seems to be moderating, and Charming Shoppes’ profit margin should improve.
Charming Shoppes’ earnings fell from 76 to 72 cents a share for the fiscal year that ended January, 1990.
Q: I bought 500 shares of Genentech at $27 3/4 a share because it was going to be taken over. Now that its heart medication, Activase, does not work, will this keep the company from being bought out? Flor, Mo.
A: As you know, Genentech--the darling of the biotech crowd for many years--recently entered into an agreement to sell a majority interest in itself to Roche Holdings Ltd. for around $2.1 billion. It’s a complicated transaction, but the important part is that Roche is going to purchase 50% of Genentech’s outstanding shares from shareholders at $36 a share.
Now, back to that heart drug you referred to. It isn’t that Activase doesn’t work. It’s simply that one study claims that Activase doesn’t work any better than another drug, Streptokinase, which sells for one-tenth the price.
Now, back to the Roche deal. Analysts say it doesn’t look like it will be affected in any way by the Activase study, which did hurt Genentech’s stock price. Roche mainly wants Genentech, they say, for its research and development capabilities and its marketing. “They want more than one product,” says Stuart Weisbrod, an analyst with Prudential-Bache Securities.
