OCR Text |
Show The Salt Lake Tribune BUSINESS Sunday, October31, 1999 All Stocks in Moderation:Diversify A bunchof co-workers have lower. Single stocks returned 11.1 per centa year, while the indexre- SAVINGS GAME taken to crowding around my desk, peering anxiously as I click for stock prices on my computer. turned 13.5 percent. Or in dollar OrI should say,the price of a particular stock. The onethat matters — the only onethatelic- terms,$10,000 invested in the averagesingle stock grewto $210,000, while $10,000 in thein dex mushroomedto $390,000. Notonly that, but the risk of its wild cheers or groans — is the stock from Tribune Company, the parent company of The Chicago ibune. No wonder, when Tribune stock makesupfrom fourth to morethan one-half of our portfolios. This overdependenceona single stock goesagainstall princi- plesof diversification long preached byfinancial planners. Butfor millions of workers in corporate America,it has become nearlyirapossible to avoid. In many companies, including ours, employee stock ownership Victor Caivano/The Associated Press Two men weed baby banana plants in a nursery at a Chiquita Brands farm in La Lima, Honduras. In October 1998, Hurricane Mitch ruined nearly all 18,500 acres operated in the Honduras by Chiquita Banana Crops Make Comeback Chiquita farms in Hondurasstarts to recover from Hurricane Mitch THE ASSOCIATED PRESS plans havereplaced traditional pensions. Some employers make matching contributionsto 401(k) plans only in coinpany stock. A growing numberof companies also are giving employees stock options, or the right to buy companystock at a discount. And many, oursincluded, requiretoplevel managers to have a perceniageoftheir salary in company stock. Not contentwith that, many of us buy even more company stock, out of a mistakensenseofloyalty LA LIMA,Honduras — It's a banana! Like a proud father, Jason Greentraipses through the Mopala banana farmin search of the famous mother: the first plant to give “birth” to a fruitproducing stem since Hurricane Mitch wiped out “The world justfell in on top of us. All of or because the stock has done ourlives had always been dependent on well, as Tribunehas. But,“as gratifyingasit is to bananas, and only bananas.” owna stock thathas soared in uita launchedlate last year to bring back its lost Green says Honduras’ first post-Mitch bananas should be harvested and exported by the end ofthe year and be in the stores of the United States and other importers by the first week of the new millennium. The “birth” comes a year after many thought Chiquita and the other major banana producer in Honduras, Dole Food Co. Inc., might not plant another banana on Honduran soil again. Mitch destroyed nearlyall 18,500 acresoperated in Honduras by Chiquita,resulting in tens of millions of dollars in losses, Steve Warshaw, the company’s president and chief operatingofficer, said in an interview from the company’s headquarters in Cincinnati. Dole lost about 12,800 of its 13,600 acres of bananas, the Honduran Ministry of Industry and Commerce sai In addition to the damage to the companies, the hurricane stripped thousands of Hondurans of the only source of income they had ever known. “The world just fell in on top of us,” said Rolando Rodriguez, 43, who started working on the Chiquita plantations whenhe wasa teen-ager. “All of our lives had always been dependent on bananas, and only bananas.” Before Mitch, as many as 15,000 to 20,000 people worked at peak production times for Chiquita in the north and Dole on the Atlantic coast, said Rodimiro Zelaya, a commerceministry official. He estimates 70 percent no longer work in the industry. At Chiquita alone, Mitch resulted in the immediate suspensionofat least 5,500 workers, more than 1,000 of whom ended up quitting or retiring, union and company representatives say. Juan Funez, president of Chiquita's banana work- ers union, said only 2,000 of the 6,300 pre-Mitch ba: nana workers have jobs today. Jimmy Zonta Sing, labor relations managerfor Chiquita's Hondurasdi vision, said the numberof workers before Mitch was closer to 5,500, but agreed only about 2,000 are work: ing again. Numbers could not be obtained from Dole. The company's Westlake Village, Calif., headquarters said only chief executive officer David Murdock could speak to the news media. Repeated attempts to schedulean interview with Murdockoverthe course of two weeks were unsuccessful Zelaya expects that as rehabilitation efforts progress on the banana plantations in the short term, about half of the previous work force will return to thefields. “I hope they get back upto70 percent dur ing the next three or four years,” he said. Chiquita has replanted 5,400 acres of bananas since May andwill have planted 2,000 moreby the end to plummet by almostone-third, ment to a companystock, say, or accordingto Berstein’s calcula: tions. In onescenario, assuming the investor sold the single stock and replacedit with a diversified toa favorite investment — and look coolly and analytically at the facts.” Among thosefacts: Howvolatile or risky is yourportfolio now? Whatwould youbuy if you sell some of your companystock? How much in capital gains taxes would you have to pay? How long wouldit take to recoup that cost? ofthe year, with additional plantingsetfor next year, year and morenext year, Zelaya said. Mitch couldn't have hit at a worse time for the Latin American banana industry, which has been badly bruised by a worldwidedrop in demand, European Union import restrictions and previous flooding in Central America. “Tt’s not exactly the time that anyoneinthe industry wants to make a huge reinvestment,” War- lemma”at a conferencefor financial advisers in West Palm Beach. Fla. She wasto discuss “some telling research we have done on thepotential pitfalls of overly concentrating wealth in a single stock,” said Ralph Heckert, managing directorfor Berstein’s pri- vate client group. Zonta said theefforts have cost the company about $8,500 an acre. “Wecontracted 40 percentofall bull- portsfell from $132.8 million to $17.1 million. The bank does not yet have estimates for production in 2000, which will depend on the results of this year's replanting. At the Cormo plantation managedby Green, double rowsofplants are in different stages of growth, with the youngest standing at 1% feet and those planted in April and May approaching14 feet. This year’s heavy rains at the end of September and early October spared Chiquita’s plantations, flooding only one that was not yet being replanted, stock, leaving the investor with almost 40 percent more money. Everything,of course, depends ontheinvestor's time horizon, unrealized gainsif any onthesin: stock was almosttwiceasvolatile as the marketas a whole; thatis, its price bounced up and down nearly twice as much. gle stock, tax bracket and future marketreturns. So, as Anderson Forthe 29-yearperiod, single said, there are no pat answers. “It's only prudent, webelieve, to considera range of plausible out- figure you get by addingall the comes.” annual returnsand dividing by 29. The index had an average an- nual returnof 14.7 percent. But becausesingle stocks had Humberto Cruzlives in Coral Springs, Fla. Write him c/o Tribune Media Services, 435 N. Michi much highervolatility, their average compounded annual rate of return — the true measureof how an investment performs — was gan Ave., Suite 1400, Chicago, IL ¥ DWS CENTRAL REGION ral an “BETTER YOUR BUSINESS” WORKSHOPS ¢ DATE: Wednesday, November3, 1999 TIME: 7:30a.m. - 9:30 a.m. TOPIC: Labor Market Information Economic information on the Web! Come andlearn aboutInternet sources where Utah and national economic information can be evaluated. Understand the nature and directionof the economy that affects your business. Evaluate the economyfrom your homeoroffice using the world’s most powerful resource. Need to makea sensible cost-of-living adjustment for your employees? Want to know whatexperts think the Feds will do next? It can be found on the Web. Dept. Of Workforce Services Administration South 1385 South State Street, Room 157A Salt Lake City, Utah But thefields that have been replanted are still in danger, both because of the threat of additional rain and becausethe government hasfailedto fortify tev: ies along the rivers to prevent future flooding, Warshawsaid. Topre-register contact: Mynn“Z”Pavlides - 468-0147 The companyhas strengthened levies on its own land and beyond to prevent further damage. In the meantime, executives are keeping an eye onthe res: toration work, carefully watching the fields and waiting for the workers’ yearlonglaborsto bear fruit “We were pretty excited about that first stem,” Introducing Television For the Next Millennium Saab VS.Ahundance 1984 ; 12° Color TV inl 32° Home Theater 1999 For the time being, 1999 Saabs are still available. 0%APR 2.9%APR. for 16 months Avoilable for Qualified Burers Ave! for Qualifi People who tmst drive 2Seab,unllybay»Saat SEERA Ken Garff Saab 543 South State * 297-7474 wrew saabura com Sumoct aporoval Oetvery mustbe laren 78 (ver raed pow 61,000 fn COMPLETE OFTAKS PAAACIPATING RAAB DEAL weew kengarfl com 60611. Send e-mail to HCruz5040@aol.com. you every Tuesday through Saturday Zonta said Greensaid. da, the top rate would be 20 percent.) By the 20th year, the diversified portfolio would have vastly outperformed thesingle Tribune TV Critic Marty Renzhofertells dozersin the countryto help rebuild,” he said. The bananas can't pop up soon enough for the companies — or for the country. Banana exports plunged 86 percent from 20 million 40-poundboxesin thefirst seven monthsof1998 to 2.8 million boxes during the same period this year. Honduras’ Central Bank says. The value of the ex- yearsto recoupthe tax cost of selling for an investor paying a combinedfederal andstate longterm capital-gains rate of 25 percent. (With nostate taxes in Flori WHOIS THE BOOB THIS WEEK? shawsaid. But Chiquita did reinvest —- to the tuneofat least $100 million to date, after concluding that new technology wouldallow it to bring its Honduran operations back toa globally competitive level. The companyis focusing on modernizingits plantations with innovations such as laboratoryproduced plants, double-row planting, deep soiltilling, new irrigation and drainage systems, aerial cables to protect plants from damaging winds, and rebuilt river levies, Green, the plantation manager, said. portfolio,it would take eight Berstein’s research tracked the returnofeachstocklisted in the Standard & Poor's 500 Index in 1970 that wasstill traded last year, evenif no longerin thein- stocks had an average annual return of15.2 percent, whichis the Warshaw said. Although the company has not decided exactly how muchof the total property it will replant, the goal is to “return to thelevels of produc- theinvestor with a 1 percent overall gain, based on Berstein’s research. By contrast, the averagesingle stock could be expected baggage — sentimental attach- Andersonspokerecently about “The Enviable Single-Stock Di- tivity we had before Mitch,” he said. Dole plannedto replant little over2,600 acres this sified portfolio would be expected to cancel each otherout,” leaving “We donotoffer any pat an- Wealth Groupfor Sanford C.Berstein & Co., an investmentresearch and managementfirm. Chiquita worker and downsofthe stock in a diver swers,” the firmsays ofits research. “We dobelievethat it is essential to put aside emotional ir Green, a brawny American, managesthree farms bananas. moneytied upina single stock. But the findings are also relevant for ordinary workers who may do well to considerselling atleast some oftheir company stock. dex.It found that the average Rolando Rodriguez tion here a year ago. folio would be expected to lose 10 percent in a bad year, compared to 22 percent with the average single stock. And over five years in a poor market environment, “the ups This researchis of particularly interest to wealthyinvestors with stock options and big amounts of value, it can be perilous to your portfolio,” said Elizabeth Anderson, directorof the Family nearlyall of Chiquita Brands International's operathat make up the 1,420-acre Cormoplantation, Chiguita’s largest in Honduras. Swinging his machete, he gestures toward the endless rows of wide, flat, green leaves and sturdy trunks, the result of a huge replanting project Chiq- loss was muchless with the in- dex. According to Berstein’s pro: jections,a diversified stock port HUMBERTO CRUZ Television has comea long way since 1954, As Utah's first andlargest dealer of professional and homeprojectiontelevision systems, we proudly Panasonic | roma Panasonic Under $2,800, Fare Panasonic Undtor $5600 MTX 212.6 Ibs. hight weight 014.1 fhe. lightweight + 13.6 Ibs. portable, + Bright 450 ANSI lumens. « Ultra bright 1,500 ANSI. « Ultra bright 1,400 ANSI. + True color 3 panel design 1 High res. 600 x 600 disp. » Durable design ) yr wart « Wide screen 16:9 capable. «S-Video and RGB inputs —« True color 3 panel design. © High res, 800 » 600 digg, 123° Home Cinema announce Panasonic's new state of the art LOD and computer projectors, Panasonic LCD ideal for conference room,travel and home + True color 3 panel design, 1 Wide serwen 16:9 made. + PC card presentation cap, += .Video & composite, Call for State and Federal GSA Contractpricing. |