Investing with B.E - how the stocks touted in Dec 1992 performed - B.E. Money Management Special Section

Black Enterprise, Oct, 1994 by Rhonda Reynolds

DAY IN AND DAY OUT, AMERICAN CONSUMERS reach for brands that they know and love as they journey through the shopping aisles. Many of these products fill the homes of millions, simply because they look, feel or taste good. It doesn't take a crystal ball to predict that the companies behind these household names are good buys for your investment portfolio.

The premise of investing in products that you know, trust and already buy is not new: Some 13,000 savvy investment clubs prove that. A National Association of Investors Corp.'s study reports that among its club members' largest holdings were McDonald's, PepsiCo and Walt Disney.

Every year BLACK ENTERPRISE convenes an Investment Roundtable and publishes the picks of our financial wizards. Here we are, yet again, putting our pundit picks to the test. In December 1992, BE profiled more than 12 stocks that were the market leaders in their respective industries. Our picks were based on past performance, present trends and future earnings growth.

So, in the spirit of last October's BE scorecard, "Investing With Black Enterprise," we investigated how our brokers' suggestions panned out. Last year, some of our brokers' hits and misses commanded a 19% return, double the Standard & Poor's 500 stock index. Several of our suggestions offered returns ranging from 32% to 128%. This year, no investment offered more than a 50% return. But that's still not bad when you consider that stock market investing requires long-term commitment and patience.

As you read, remember that 365 days is not a true gauge of a stock's five- or 10-year payout. By all means, study each company's future plans as well as their explanations for flops. True, many of you may be wincing from losses due to market corrections, but that's nothing new either. In fact, during the past 93 years, there have been 50 occasions when the market declined 10% or more--usually once every two years.

So, where does that leave you? Should you hold or fold what you have? Well, it depends. Are the reasons you bought the stock to begin with still true? If the answer is yes, don't get rid of them. The overall advice from financial experts is to "keep your eye on the prize"--and look for a long-term upward trend that will reward your patience.

MATTEL INC.

In 1992, Barbie ran for president and Hot Wheels shifted into top speed. Such industry triumphs had shareholders playing with profits from Mattel for the fifth straight year.

The $2.7 billion toy titan is still boasting about sales for its perennial beauty--Barbie is worth more than $1 billion. Over the last six years, Barbie has put on average $100 million per year into Mattel's till. With the launch of the "Come along with me" campaign, which graduates Barbie from "babe" status to pediatrician, big bucks should continue to roll in this year.

Mattel also bought the rights to create a toy line based on Disney's The Lion King. And shareholders who can't get enough of Micky D's can cash in on Mattel's premier "Happy Meal Magic" activity toys.

Thanks to last year's merger with Fisher-Price, the new infant and preschool toys division is now their "most treasured asset," says Mattel CEO John W. Amerman. Indeed, 1993 was a golden period in Mattel's nearly 50-year history: A thousand bucks invested in Mattel in 1993 would have earned you $1,393 today.

Mattel offered shareholders a 5-for-4 stock split last January. The company is finally offering a dividend reinvestment plan, allowing investors to buy additional shares without paying the cost of commissions charged by brokers. Mattel is selling at $27, up slightly from $24 the last time we recommended it.

MCDONALD'S CORP.

President Clinton is not the only one who loves Big Macs. The second most recognized brand name after Coca-Cola, McDonald's already has 14,000 restaurants in 71 countries. And the global appeal of those golden arches remains as strong as ever.

Sales and profits abroad are in the double digits. Offshore sales of such products, as McSpaghetti (noodles in the Philippines) and McLak (a salmon sandwich in Norway), contribute 47% to Micky D's $7.13 billion total earnings. Meanwhile, another 700 to 900 restaurants will open up this year outside of the United States.

According to Moody's Corporate Credit Report, a globally respected brand name, a strong franchise system and financial flexibility will enable McDonald's to successfully pursue its key strategic objectives. Plans are underway to reduce operating expenses and expansion costs.

Due to a stock split, McDonald's is selling at nearly $27 per share. This year's high was $62.5. Although $1,000 invested last winter would have rendered only $1,084 today, this stock is due to rebound. Experts advise: Buy it up while it's still cheap.

NIKE INC.

Nike is truly taking its empowering "Just Do It" motto to heart. While the athletic footwear giant's market growth has been decreasing, Nike still dominates the industry with a 30% share.

CEO Phillip Knight predicts that the $3.9 billion company will see $6 billion in annual sales by 1996; half of that will come from international sales, which topped $1 billion last year.