Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 3, 1993 TAG: 9301010052
SECTION: BUSINESS PAGE: E9 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
REGIONAL BROKERS GO ON RECORD WITH THEIR STOCK PICKS FOR 1993
Scott & Stringfellow Investment Corp. picked six Virginia companies on its year-end list of a dozen stocks with above-average potential for appreciation in 1993.The Richmond-based brokerage with an office in Roanoke, listed the gamut from major national corporations to small companies in special situations.
The major corporations were Philip Morris Cos. and Bristol Myers Squibb Co.
Less well known picks were Ryan's Family Steak Houses Inc., a South Carolina restaurant chain, and Maryland's Hechinger Co., operator of more than 120 home center stores in 18 states and the District of Columbia.
The six Virginia companies that made the list were:
Central Fidelity Banks, Inc., one of the Virginia's major statewide banking;
Hilb, Rogal & Hamilton Co., an insurance brokerage firm;
Owens & Minor Inc., one of the country's largest hospital supply companies;
Smithfield Foods Inc., a pork processor;
United Dominion Realty Trust, owner of more than 12,000 apartments in four states, including some in the Roanoke Valley;
Universal Corp., the world's largest dealer in leaf tobacco.
The final two selections were GTE Corp., which provides local telephone service in 40 states and has the nation's second largest cellular network, and South Carolina's Fleet Mortgage Group. Fleet, which went public last July, is a leading originator and servicer of residential mortgages.
A year ago, Scott & Stringfellow's portfolio contained 13 companies.
The 1992 stocks appreciated an average of 34.9 percent last year, not including dividends, the firm said.
Ten of the stocks picked last year are up in price. Two of them, Crestar Financial Corp. and Synalloy Corp., more than doubled.
Jeffrey D. Levin, Scott & Stringfellow's director of research, said the brokerage firm's analysts believe the economy will expand modestly next year with interest rates remaining relatively low.
"Small capitalization stocks have significantly out-performed large capitalization issues over the past two years," Levin said. "We think this can continue but at a lesser rate of out-performance."
For the most part, Levin added, the dozen stocks on the 1993 list were picked for their expected ability to capitalize on favorable industry trends.
Three of this year's picks - GTE, Smithfield Foods and United Dominion Realty Trust - are repeats from a year ago.
\ Dean Penley of the Roanoke office of J.C. Bradford & Co. prefers the stocks of small growth companies instead of blue chips in 1993. His picks:
South Trust, a bank company based in Alabama. He said it has a record of growth and income and should be attractive to long- and short-term investors. Penley believes it is undervalued in comparison with other super-regional banks, all of which are very strong.
Manor Care, which operates chains of both nursing homes and economy motels. Penley said the company once used the name Quality Inns until it entered the nursing home field. Its earnings have grown 20 percent to 25 percent a year.
Shoney's, the Nashville, Tenn., restaurant chain with operations in Western Virginia. Penley said the stock was down because of a hiring discrimination suit, but that has been settled on favorable terms. He said the company has a good track record and more than 100 quarters of earnings increases.
Medaphis Corp., based in Atlanta. The company handles billings for hospitals and physicians and manages accounts receivables for hospitals. Medaphis has been acquiring smaller local and regional companies in this new field and is growing at 35 percent a year.
Sports and Recreation, a chain of sporting goods warehouses. A low-cost retailer, its stores exceed 40,000 square feet offering all types of sporting equipment.
Michaels Stores, a chain of 168 stores in the Southeast that sells items for arts, crafts, hobbies and leisure activities.
\ Robert Kulp, manager of the Roanoke office of A.G. Edwards & Sons, chose stocks from different industries for a New Year's portfolio. The stocks he likes are:
Emerson Electric, which is a play on an expectation of economic recovery. Emerson manufactures a wide range of products such as electrical controls, valves, heating and ventilating equipment.
Merck & Co., a drug manufacturer. Kulp said the company is a leader in research, development, sales and management.
Philip Morris Cos., a tobacco and food conglomerate. Kulp said 50 percent of its revenues come from food (including Nabisco and Kraft brands), 42 percent from tobacco, 7 percent from brewing and 1 percent from finance.
Chevron, which is best known as an oil company. Kulp said it also produces and refines natural gas. He said Chevron is most suitable for a long-term investor.
Dominion Resources, the parent company of Virginia Power. Kulp said this stock is suitable for a long-term, conservative investor who seeks a good dividend.
Clear Channel Communications, which owns 23 radio stations and seven television stations in the South and Midwest. Kulp said this stock is a bet on the success of the Fox network, with which six of its television stations are affiliated.
\ The Asset Management Division of Dominion Trust Co. in Roanoke selected eight stocks for the new year. They were chosen by Jack Gray, senior vice president and chief investment officer, and Steve Bowery, vice president.
American International Group, which they called the world's premier insurance company. Specializing in property and casualty lines, AIG operates internationally and recently entered the Russian and Chinese markets. It should benefit from an improved pricing environment in 1993.
Bank of New York, founded by Alexander Hamilton in 1784, is the leading bank in the New York suburbs and an important lender to midsize companies nationally. It is profiting from a series of acquisitions and more efficient management.
Becton, Dickinson, a medical supplies and technology manufacturer, has invested $1 billion since 1985 to support a strategy for dynamic growth. It focuses on productivity, innovative product design and geographic expansion.
Brown-Forman Corp. combines spirits (Jack Daniel's, Canadian Mist, Early Times, Bolla, Southern Comfort and Korbel) with fine china and collectibles (Lennox, Dansk, Gorham and Kirk Stieff). They said it is a conservative company whose earnings growth rate is 12.7 times higher than its price earnings ratio.
Hong Kong Telecommunications, which has exclusive franchises for local and international telecommunications services in Hong Kong through 1995 and 2006 respectively. It should benefit from the high growth of the Hong Kong economy and increased telephone traffic with China.
Kmart, the world's second largest retailer which is in the midst of a massive modernization program that should increase customer traffic and allow better competition with other discounters. It also owns speciality stores such as Waldenbooks and Pay Less Drug, where earnings are growing rapidly.
Lukens Inc., a low-cost producer of heavy steel plate used in construction of bridges and heavy construction equipment. It will benefit directly from rebuilding of the nation's highway system already funded by Congress and from improvement in the steel industry.
SuperValu Inc. the nation's leading food distributor. The wholesaler serves more than 5,000 independent grocery stores.