Summertime, and investors are wary; consumer issues get special review

For millions of Americans, yesterday's Memorial Day holiday represents a special turning point, beyond its importance for honoring servicemen and servicewomen who gave their lives defending the United States. It also represents the beginning in earnest of the spring/summer vacation period in the United States.

For US equities markets, this period can be a time of uncertainty. And for a number of consumer-oriented industries - food stores, newspapers, restaurants, hotels, airlines, and entertainment - it can be a time of opportunity as well as risk.

It is during this period, when many families change their day-to-day living patterns, go to a few extra movies, read a book or two at the beach, or flip off the television set, that fortunes can be made or lost for not a few corporate entities.

That spring/summer cycle gains more importance when the market is buffeted by economic concern, as it is now, with investors worried about stronger than expected economic growth and a possible resurgence in inflation, as well as political issues like the call by the Securities and Exchange Commission to regulate stock-index futures.

Consumer-service and entertainment-oriented companies tend to get special scrutiny during the summer months. But the group as a whole ``has been relatively flat since the beginning of 1987, relative to the market as a whole,'' says John D. Connolly, senior vice-president at Dean Witter, New York. Indeed, Mr. Connolly notes that the group has outperformed the market only by about 3 percent during that period.

Consider the summer food-shopping-and-restaurant link. During the summer, more people eat out, or on the run. So grocery stores, according to a new report by Charles Cerankosky, an analyst at Prescott, Ball & Turben, are facing stepped-up competition from restaurants. Thus, Mr. Cerankosky says, ``supermarkets need to better emphasize their takeout food offerings.'' He cites Albertson's, Hannaford Brothers, and Big Bear among retailers creating new types of grocery stores.

Of all the consumer service or entertainment industries, perhaps none is followed as closely during these as broadcasting, as the television networks invariably prepare for their fall programs. ``There is currently a tremendous amount of change under way in the broadcasing industry,'' says Vance Brown, an analyst with Prudential-Bache, in New York. The Big Three networks, NBC, ABC, and CBS, Mr. Brown says, are all under ``increasing competition from cable television, as well as stepped-up syndication of independently produced programs.''

Still, ``it seems likely that all three networks will continue to be with us for a long, long period of time,'' he says.

Interestingly, both CBS and ABC (the latter owned by Capital Cities Communications) have seen their stock fall somewhat in recent weeks. Since March 31, Capital Cities has been down about 10 percent; CBS down about 5.5 percent, Brown says. General Electric, which owns first-place NBC, is not quite comparable, since that company has so many non-entertainment divisions.

For the moment, the networks are hard at work selling advertising time for the fall season. ``Both CBS and ABC have said that sales are so far not as strong as expected,'' Brown says, although there is a long way to go before the selling season is over.

One reason for the current slowness in advertising, he says, is that the writers' strike is seen as a continued detriment to the industry, although efforts are under way to resolve that impasse.

The biggest battle in the entertainment industry this summer involves Paramount Pictures, a subsidiary of Gulf & Western Corporation, and Tri-Star Pictures. Paramount has just released ``Crocodile Dundee II'' and will soon release a new film with Eddie Murphy. Tri-Star has ``Rambo III.''

The market could use a little of Rambo's clout right now, to woo investors back to equities. For the week ending May 27, the Dow Jones industrial average closed up 3.85 points, at 1,956.44.

Any mini-resemblance to Rambo on the market last week may have come from Carl Icahn, who pursued his quest for control of Texaco, this time offering $60 a share, although investors seemed to be skeptical about the offer. The US continued to show a little Ramboishness as well, with the federal government reporting that the economy grew at an annual rate of 3.9 percent in the first quarter. The market took the brisker pace calmly, however, since most investors had anticipated the growth. Among individual companies, Boeing scored last week with another billion-dollar-plus sales deal, its third in two weeks.

Despite the coming warm days, a less-than-sunny outlook seems in store for newspaper stocks, says Eric S. Philo, an analyst with Goldman, Sachs. Investors should ``stay cautious toward the newspaper stocks,' in large part because of ``impending further weakness in industry ad revenue,'' Mr. Philo says. Last year, total industry ad revenue grew 9 percent. But Philo believes ad revenue growth could slow to between 3 and 5 percent in the second half of this year, from 5 to 8 percent growth in the first half.

The upshot is that Philo does not have have any newspaper issue on the buy list now.

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