Jack TenneyExtra Point

by Jack Tenney, Publisher

January 2000

Financial house-cleaning

January is the month for financial house cleaning, right?

More millions than Mr. Greenspan can count are added to the investment pool. Mutual fund sales, insurance premiums, pension-fund contributions all enjoy their largest months. As these dollars try to squeeze into the market, it's pretty hard for quality stocks to resist the price rises that occur when demands exceed supplies.

So is it safe to dump Phillip Morris (MO), Eastman Kodak (EK), Sears (S) and Bank of America (BAC)? They are my four losers. How could it be?

Each is a long-established Dow-Jones industrial component. They're all profitable; all pay nice dividends. Each is supported by institutional investors because of their liquidity. But each has a way of retreating from broad rallies and systemic good news while retaining the unnerving tendency to participate in every correction, pause and profit-taking down day.

If I sell them out, won't they each find a way to jump back to a price within spitting distance of my current basis? And, if they do, won't I suddenly be assured that my original instinct to buy into their values before was correct? So, I'll buy 'em back. Then, what, they'll tank again!

So here are the facts. Phillip Morris (MO) is a huge company that not only tries to hook smokers for life, it also has a heck of a beer and candy business. I think it's a $65 stock. I thought it was a $65 stock when I bought for $35. Admittedly, I've had doubts about its worth as it traded for less than $25 a share.

Eastman Kodak (EK) is to photography what Coca Cola is to soft drinks. (Thank goodness I didn't buy any Coke stock at its high!) The question is: Will anyone born after Jan. 1, 2000, ever buy a camera that shoots film? Won't everyone use electronic cameras and have their pictures developed online or through their VCR/DVD recorders? So, that being the case, why did I (or anyone else) buy EK shares? Dividend yield and earnings? Great now but what then.

Sears (S) has been a fancy yo-yo on a short string. What once was the nation's greatest retailer and largest direct seller -- Remember the Sears catalogs where you could buy a tractor, a first basemen's mitt, a J.C. Higgins bicycle and pajamas all from the same catalog? -- is still one of the largest consumer lending agencies. Sears' income from interest earned on revolving credit accounts is greater than its net income. Its accounts receivable are greater than its annual sales. It makes money; it pays dividends; its share prices are in the toilet; and I'm stuck with 100 shares.

Bank of America (BAC) is the country's largest bank. One of the banks it bought (NationsBank) is larger than any bank operating in Vermont. The bank makes money, pays dividends and its stock underperforms Sears and Eastman Kodak. Go figure.

M-O has got to go!

It is never going to grow.

Things ain't developing for EK!

Shoulda shorted last May.

Sears, it seems, hasn't made a buck

Since it dumped that old Roebuck

And I can't believe that BAC

Is still the stock that's meant for me.

Oh, my gosh! I have to sell all these losers before year-end! Gotta go, Happy New Year. (Dec. 16, 1999)