Should You Snag These Stocks? - finance

Kiplinger's Personal Finance Magazine, August, 2001 by Jeffrey R. Kosnett

AFTER PRODUCING record earnings in 1999, 102-year-old Federal-Mogul lost money last year and is expected to generate red ink in 2001 as well. The stock has crashed, dropping from $72 in 1998 to $3 recently.

KEEP | Federal-Mogul

Symbol: FMO
Recent price: $3(*)
Earnings per share 2001: -$1.48(e)
P/E ratio: Not meaningful

(*) to June 1

(e) estimate

[GRAPH OMITTED]

Federal-Mogul, which makes everything from brake pads to pistons to camshafts, is suffering from soft demand from both its auto and heavy-duty-truck customers. The company also faces huge asbestos claims, which in 2000 cost it $351 million, or more than the company's total marker value today. Meanwhile, the arrival of new management in January adds to the uncertainty.

Still, the shares, which trade at a mere 4% of sales, could easily be worth far more someday. Standard & Poor's likens the stock to a call option "offering significant upside potential but with the risk of becoming worthless." On the positive side, banks continue to lend the company money. A reviving economy is bound to help, too. And, just as with Campbell, it's fair to give new CEO Frank Macher, a 30-year Ford veteran, a chance to turn the company around.

FOR MOST OF the 1990s, shares of Hasbro essentially marched in lock step with Standard & Poor's 500-stock index. They ran up in early 1999 with the revival of Star Wars, and then, just as suddenly, blew up like the Galactic Empire's Death Star. CEO Alan Hassenfeld (his grandfather co-founded the company) has asked shareholders and analysts to forgive a disastrous, money-losing 2000 because "there were no major product drivers."

KEEP | Hasbro

Symbol: HAS
Recent price: $15(*)
Earnings per share 2001: $0.33(e)
P/E ratio: 45

(*) to June 1

(e) estimate

[GRAPH OMITTED]

Until Hasbro comes up with a new monster hit, it can subsist on sales of such standards as Scrabble and Tonka trucks. Hasbro is a long way from duplicating its record profit of $1.45 per share in 1999, but analysts expect to see an improvement this year, to 33 cents per share, and a jump to 69 cents in 2002. The stock, recently at $15, sports a modest price-to-sales ratio of 0.73.

John Miller, assistant manager of Ariel fund, says he thinks Hasbro will become less volatile and more of a steady grower in the years ahead as the company emphasizes its core products. Along the way, "once in a while, it may get lucky," he adds. There's just no telling when.

IN A WORLD of digital photography, throwaway cameras and one-hour film processing, instant photography loses some of its allure. That explains why sales by Polaroid, the originator of the 60-second snapshot, have been trending down since 1994. Its stock, which hit $60 in 1997, now trades for less than $5.

KEEP | Polaroid

Symbol: PRD
Recent price: $4(*)
Earnings per share 2001: -$0.12(e)
P/E ratio: Not meaningful

(*) to June 1

(e) estimate

[GRAPH OMITTED]

Polaroid is hardly ignoring the digital age. Its low-priced digital cameras have made a splash at supermarkets and mass-merchandise retail outlets. It also plans later this year to ship a new line of digital printers that will allow users to "develop" high-quality prints in minutes from images on their cameras. Polaroid, which will be able to license the technology to other companies, says the new ventures could add $1 billion a year in new sales by 2005.