Q. I own 100 shares of Dayton Hudson Corp. What is the outlook for my stock, particularly in light of the company's acquisition of Marshall Field & Co.? Some of its previous acquisitions seemed to depress earnings.
A. This retailer is well-stocked with potential.Dayton Hudson (around $68 a share, New York Stock Exchange), which operates department, discount and specialty stores, is a stock worth holding or buying, advised Ed Weller, analyst with Montgomery Securities.
Most important, the company's Mervyn's chain has been enjoying explosive profits since 1988, and its Target discount stores have been contributing nicely to earnings since late 1989.
"While, as you mentioned, Dayton Hudson's ambitious acquisition of three different retail chains put a strain on its corporate earnings, this move has now begun to pay off," Weller observed.
Dayton Hudson has also boosted profitability by consolidating back-room operations of its Detroit and Minneapolis stores. It will now expand this efficiency-oriented strategy to include Chicago-based Field's.
"I don't expect major changes at either Dayton Hudson or Marshall Field's, apart from more Dayton Hudson private-label products at Field's, or perhaps Frango Mints appearing in Dayton Hudson stores," Weller said. "Marshall Field's under Dayton Hudson should become even more profitable and will also expand, thereby contributing significantly to the new owner's earnings."
Q. My wife and I have owned shares of Eastman Kodak for many years. We are adjusting our portfolio and want to know whether to sell or keep this investment.
A. You may not like this picture.
Eastman Kodak Co. (around $36, NYSE), famous maker of photographic equipment and chemicals, is a stock that should probably be held for now, but sold if its price rises another 10 percent or so, said Michael Ellmann, analyst with Wertheim Schroder & Co.
The decade of the 1990s is expected to be much more difficult for Eastman Kodak than the 1980s were, mostly because alternative imaging technology offers stiff competition.
"Even if Kodak is more aggressive in its cost-cutting measures, it won't be sufficient to cause a dramatic increase in earnings," Ellmann said. "From the perspective of demand for its products and its market share, the outlook seems to indicate poor profit margins for quite some time."
Q. I am enrolled in a company-sponsored 401(k) program that allows for loans. Will I be taxed on the amount I borrow, since the loan is for personal reasons?
A. Since you'll be taking a participation loan, rather than a hardship withdrawal that won't be repaid, there will be no immediate tax implications, said Judy Thorp, retirement specialist with Grant Thornton.
"When you take out the participation loan, you must make at least quarterly payments to the plan based on an amortization schedule," said Thorp. "Normally, you can't take out a loan for longer than five years."