Investing: Newell Rubbermaid’s variety of brands poses challenge

Question: The bottom seems to have fallen out of my shares of Newell Rubbermaid Inc. What should I do? — D.H.

Answer: There’s much more to this global maker of consumer products than its namesake Rubbermaid storage products.

Having a foothold in numerous fragmented categories means an extensive brand lineup that, while not easy to track, offers potential for market-share gains. The problem is that its opportunities are limited by struggling developed-nation economies and uncertainty over how consumers will react to price increases tied to raw materials.

Shares of Newell Rubbermaid recently were down 29% this year.

Confidence in the stock depends on whether the investor believes management can pump renewed life into the firm’s lagging baby and consumer-product businesses. It also faces competition from private-label manufacturers and the demands of servicing so many varied brands.

Second-quarter earnings were up about 13% on reduced restructuring charges and improved sales. But management in June and again in July reduced its earnings forecast for the year because of economic concerns.

After the Newell Rubbermaid board of directors approved an ambitious $300-million stock-repurchase program, Standard & Poor’s in August revised the company’s outlook to stable from positive.

Newell Rubbermaid brands include Sharpie, Parker, Paper Mate and Waterman pens; Calphalon kitchenware; Levolor and Kirsch blinds; Dymo labeling; Graco baby products such as strollers; Goody beauty supplies; Irwin, Shur-Line and Lenox hardware products; and Ace grooming tools and products.

The consensus analyst rating on Newell Rubbermaid is “buy,” according to Thomson Reuters, consisting of five “strong buys,” six “buys” and five “holds.”

Michael Polk became Newell Rubbermaid chief executive in July. He had been an executive at Unilever.

Question: Please give your opinion of Alger Spectra Fund. — G.R.

Answer: Though more aggressive than many large growth funds, this diversified fund has effectively handled recent volatility.

The $1.1-billion Alger Spectra “A” recently had been up 12% over the previous 12 months to rank in the upper one-fifth of large growth funds. Its five-year annualized return of 8% placed it at the top of its category.

“We like this fund a lot and consider it one of the bright spots within the funds of Fred Alger Management Inc.,” said Janet Yang, mutual fund analyst with Morningstar Inc. “It can be a core holding, but since it is a little spicier than many of its peers, you would want to pair it in your personal portfolio with a value fund or a less-aggressive growth fund.”

Portfolio manager Patrick Kelly has been in charge since September 2004. He has more than 14 years of investment experience, primarily as a stock analyst. He buys stocks of firms with strong balance sheets that are selling at a discount in light of their earnings potential. The fund can short up to 10% of its assets, adding risk and the possibility of losses.

Kelly does not adhere strictly to index benchmarks, though he generally stays within about 10% of index weightings. He will sell a stock immediately once it reaches his price target. That means portfolio turnover is high and can increase trading costs and reduce tax efficiency.

The fund’s biggest concentrations recently were in technology, consumer services, industrials, healthcare and energy. Foreign stocks represented about 9% of the portfolio.

This 5.25% “load” (sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.26%.

Andrew Leckey answers questions only through the column. Write to him at yourmoney@tribune.com.