Question — I recently inherited stock in Dana Corp. and am trying to decide what to do with it. What are its prospects? — A.J., Chicago
Answer — The nation's third-largest maker of automobile parts is stalled.
Declines in truck and sport/utility vehicle manufacturing by some big customers, especially Ford Motor Co., are contributing to its woes. So are softness in aftermarket parts sales and weakness in the euro currency.
To get back in gear, Dana is laying off 3,500 employees and has closed five plants this year. It divested non-core businesses with annual sales of more than $660 million, with the stated intent to unload some more.
The firm's shares have fallen 37 percent in value in 2000, following declines of 24 percent last year and 12 percent in 1998.
"The economy is slowing and automakers are getting hit, so it's no huge surprise that an economically sensitive company such as Dana would be hurt," said Joseph Kalinowski, equity strategist with the I/B/E/S International research firm.
Consensus on its stock from Wall Street analysts who track it is currently slightly better than a "hold," according to I/B/E/S. That consists of three "buys" and nine "holds."
Dana's third-quarter earnings declined 62 percent from a year ago, missing analyst estimates by a penny. The fourth quarter is also expected to be weak.
Earnings are expected to decline 29 percent this fiscal year, versus a 1 percent gain for the overall auto parts industry. Next year's projected 19 percent decline compares to a 4 percent gain for its peers.
Longer term, Dana remains a giant, conservatively run organization with little debt that should benefit from increased outsourcing of parts by carmakers. Some of its most important products include axles, brakes, drive shafts and structural products. It operates facilities in more than 30 countries.
Question — What happened to my shares of AIM Value Fund? I didn't expect to see a large-cap value fund suffer such a large drop in a short period of time. — M.V., Evanston, Ill.
Answer — A name doesn't always tell the full story, for this fund emphasizes growth in addition to value.
The fact that AIM Value Fund's aggressive portfolio includes more technology, cable and retailing holdings than the typical value fund is the primary reason behind its stumble in 2000.
This $27 billion-asset fund declined 11 percent in value over the past 12 months to rank in the lowest 10 percent of all large-cap funds that combine value and growth. Nonetheless, its three-year annualized return of 14 percent still places it in the top one-third of its peers.
"Expect to see a bit more volatility with AIM Value Fund than with other value-oriented funds, making it a more aggressive core holding," pointed out Valerie Putchaven, analyst for the Morningstar Mutual Funds investment advisory. "Despite some faltering in 1996 and 1997, the fund has turned in a strong 10-year annualized return of about 22 percent."
AIM Value Fund looks for companies based mostly on their growth rates and the stock prices required to obtain those rates, Putchaven noted, rather than the typical value fund's emphasis upon price-to-earnings ratios. Respected senior portfolio manager Joel Dobberpuhl has been with the fund since 1992.
Its top industries are broadcasting, computer hardware, semiconductors, retailers and financial firms. The largest holdings among its 56 stocks were recently Comcast Special Class A shares, Nextel Communications, Tyco International, Target, Morgan Stanley Dean Witter, Cox Communications, Analog Devices, American International Group, Pfizer and Nortel Networks.
The fund's Class A shares require a 5.5 percent "load" (sales charge), while B shares have a back-end load and C shares have a level load. The minimum initial investment is $500.
Question — My husband and I would like to know how you should go about investing your money once you're retired. We have all of our money in a Standard & Poor's 500 index fund. — L.B., via the Internet
Answer — It's important to keep paying attention to investments after you retire, since most Americans have a life expectancy of 20 years or more beyond that point.
Ideally, at retirement age you should have 18 months' to two years' worth of living expenses set aside in liquid investments, such as quality short-term bond funds and certificates of deposit, advised Marilyn Capelli Dimitroff, certified financial planner and president of Capelli Financial Services Inc. in Bloomfield Hills, Mich.
This money should be available so that you don't have to sell your stocks or mutual funds, which constitute the next important portion of your retirement investments, she explained.
"An S&P 500 index fund is a great core holding, but you want to invest in a variety of areas that don't all move in lockstep," Dimitroff emphasized. "You might also want to look at a small-company fund, a foreign stock fund or some intermediate-term fixed-income investments."
Increasingly, retirees are including growth in their portfolios, she said. Compared to the past, the people she sees investing primarily in CDs these days are in their 80s, while those in their 60s and 70s are more likely to emphasize stocks.
Andrew Leckey answers questions only through the column. Address questions to Andrew Leckey, "Successful Investing," 98 Henry St., Dept. 183, Brooklyn, NY 11201, or by e-mail at successinv@aol.com.