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Stocks in the furniture and home furnishings industries have remained stable in the last quarter of 1997, although the stock market has been volatile. The increase in housing starts in 1997 has not led to increased furniture sales, nor has lower interest rates, although the office furniture market has remained positive. Rankings for these stocks are favorable for investors in 1998, and several individual issues are appealing for commitment.

The stock prices of manufacturers of furniture and home furnishings have risen after the companies cut costs and improved efficiency, but revenue from sales has been disappointing. Slow sales of moderately-priced lines have caused financial difficulties for such retailers as Levitz, which has filed for bankruptcy protection. However, sales of office furniture have risen, and the stocks of these companies should make sound investments.

The petroleum (integrated) industry continues to benefit from strong demand for its products, but investment in this industry is untimely. Strong demand for petroleum is being driven in part by continued economic expansion both in the US and abroad and in part by consumer demand for sport utility vehicles, which tend to use higher amounts of gasoline. However, excess petroleum chemical and petroleum refining capacity will help lower earnings.

Oil prices are expected to drop approximately 10% in 1997 from the highs reached in 1996 as supply will be greater than demand but an anticipated rise for the following 2-3 years could be an attraction for long-term investors. Cutbacks and closings of U.S. oil refineries will help balance oil supply and demand. Better than average dividends, expectations of growth, and a strong safety record make some petroleum industry securities a logical choice for conservative investors.

Office furniture manufacturers were the only section of the furniture and home furnishing industries to perform even slightly above the industrial market average in early 1996 and only a very few companies within the industry are expected to show any growth in the coming year. Demand for products has been dropping steadily although companies have improved their own economic positions, so the overall expectations are moderate to poor.

The medical supplies industry has always depended upon technological advancements but it is necessary for the benefits of new medical instruments to be worth more than the costs. The cyclical nature of the industry does not preclude that there are stocks that will interest investors. It is necessary to study their value and it may not be wise to hold on to them until the year 2000.

The soft drink industry reported about 6% growth in the first half of 1996. Coca-Cola experienced an 8% rise in both domestic and foreign sales. Greater expansion is expected during the next few years, especially for exports. Soft drink industry stocks are rated timely buys for the immediate future and good investments for the three- to five-year period.

Grocery stores are reporting good financial results, and earnings are expected to remain good for the next few years. In spite of high stock prices, many chains are rated as good investments with above average safety. Unions are striving for higher wages at chains such as Kroger and Safeway. Nevertheless, promotion of private labels and take-out meals give investors confidence in continued high sales.

The food processing industry fears rising food prices, driven by high global demand and tight supplies. Pressure on prices may ease as farmers increase acreage of corn, wheat and fruits, but growing population trends are expected to keep food prices high. Some processors, such as Hershey Foods, try to keep prices low to maintain their market share. Several food company stocks appeal to conservative investors because of safety, but most are not rated timely for 1996-1997.

Stocks in the household products industry are not timely in 1996, due to the defensive traits of the industry's profits in a strong economy. Revenue and earnings have only been mediocre since 1992, also. Mass merchandisers have become larger and more sophisticated in their inventory management, and small manufacturers must change to survive. Further industry consolidation is anticipated, along with internal structural transition.

Restaurant industry share prices increased in the 2nd qtr of 1996 after good 1st qtr 1996 earnings. Restaurant chains will be affected by the minimum wage increase under consideration by Congress in 1996, but will be able to pass this on through higher prices. Low ingredient costs in 1995 and 1996, which could increase in 1997, have helped restaurant finances. Many stocks are timely in 1996, and several have potential for 1999-2001.

Medical supplies sales in the next three to five years are expected to increase through the late 1990s with new product introductions, along with reforms in FDA product review. Lower capital expenditures by hospitals and new outpatient treatment facilities will have an impact on medical supplies sales as well. Industry earnings for 1996 and 1997 are expected to be good, and these stocks should outperform the market.

Stabilizing raw materials prices should benefit the packaging and container industry. Share prices have increased but early 1996 is not a good time to invest in these stocks except for long-term values. Raw material pricing changes should increase the earnings within the industry and foreign markets may also beckon with potential sales.

Oil prices rose in 1995 with Asian-Pacific development, European economic recovery, and US economic expansion, although there is overcapacity. There is adequate supply for increased demand, especially from non-OPEC producers, but static production quotas have been voted by OPEC for its members. Cost cutting, automation, and refining are key earnings factors. Several of these stocks have three-to-five-year appeal, although the industry is now defensive.

The restaurant industry is comprised of the casual dining, family, and fast food segments. These segments have been showing divergent trends in the last three months of 1995. Fast food chains are having the best results, family restaurant earnings are more mixed, and casual dining chains are seeing slower sales. These stocks are average investments for 1996, but several, such as McDonald's and Applebee's, are timely.

There was further consolidation in the medical supplies industry in 1995, especially in the interventional cardiology field. Revenues and earnings for the industry have also been strong in 1995. There will be increased demand for medical supplies and services in 1996 with improved living standards and the aging population worldwide, which will benefit profit margins. There are a wide variety of timely stocks in this industry for investor selection.

Private-label brands in supermarkets are increasing their market share, due to profitability for stores and greater budget-mindedness by consumers. Food processors are then contending with private-label competition and several have lowered prices. Others also have a stake in the private-label business. Most of these stocks are defensive and not expected to outperform the market. These stocks are suitable mainly for conservative investors.

Volume grew more than 6% in the soft drink industry for the 3rd qtr of 1995, but gains will return to the 3%-4% level in 1996. Market share gains for new products accounted for some of the growth. PepsiCo and Coke still have the largest market share, even with industry consolidation. International sales are growing with the exception of Japan and Mexico. Shares in the soft drink industry will outperform the market through 1998-2000.

There will be good earnings for supermarket chains in 1995, due mainly to cost reduction. Competition will increase, however, with the addition of more stores. Product mix, especially with private-label brands, may help improve profit margins, but low inflation is keeping top-line growth low. Several of these shares are risky, but chains with strong growth may appeal to investors for the next three to five years.

Household products historically have been defensive, with relatively stable profits compared to other industries. Uneven earnings have changed the appeal of these stocks, however. Hard goods, such as small appliances, and soft goods, such as toothpaste and soap, are the two main subgroups of this industry, both of which are seeing less demand. Investors in this industry need to evaluate these stocks on an individual basis.

Excess supply, weak demand, and higher raw material costs are affecting the packaging and container industry. This situation is not likely to improve, since low demand does not allow these companies to pass costs on. The need for capital gains, growth, and keeping the US glass manufacturing business alive will encourage more consolidation. These stock prices have declined 10% since Jul 1995 and long-term industry prospects are not good.

Furniture industry stock prices have underperformed the market since 1994 due to sluggish sales and high fixed furniture plant costs. Several companies are installing computerized and state-of-the art equipment to modernize their facilities. Furniture orders are smaller, however, since retailers are reducing inventories. These stocks are not timely and investors will find few selections in this industry.

The Organization of Petroleum Exporting Countries is maintaining current production through the end of 1995, though demand for oil is being met. US refiners are profitable with higher demand for gasoline, and there is a shift from European to Asian operations, reflecting changes in demand. Good petrochemical earnings will continue through 1996. Several of these stocks are good investments for the next three to five years.

Earnings for grocery stores are strong in 1994 and 1995, due to cost cutting and greater efficiency. Expansion will lead growth for the next three to five years, but less competitive operators will lose market share. Cost containment through more efficient distribution, warehousing, and procure will enhance earnings. Several stocks will outperform the market for the due to greater profits for the next three to five years.

The home furnishings industry's stocks are not considered a timely investment, although earnings of the home furnishings and furniture industries rose somewhat toward the end of 1994. Demand for furnishings is expected by owners of older homes who remodel and redecorate. Also, home-based workers are creating a demand for office furniture.

Integrated petroleum companies face tough competition from independent refiners, but industry experts expect higher profits over the next three to five years. The industry as a whole has weathered a poor economic situation fairly well, and several stocks provide high current yields and are therefore potentially rewarding. Stocks are expected to be supported by gradually increasing global oil prices and by strength in the petrochemicals sector.

Restaurant stocks have declined during 1994, due to overbuilding in the casual dining sector, plus other factors, and the industry, as a whole, is ranked low at 76 (of 96) in terms of investment timeliness. However, the three-year to five-year outlook looks more promising because the new Republican-dominated Congress will most likely hamper the passage of a national health plan. In addition, low inflation should keep food costs low, which will boost profits.

Stocks in the medical supplies industry are expected to perform well out to 1998-2000. The loss of tax benefits for many companies in Puerto Rico should be countered by higher sales from new products and services during 1995. Potential long-term investors should examine timeliness and safety ranks for particular companies especially carefully, although the industry as a whole is expected to do well.

Canadian banks are profitable in 1994, thanks to a stronger economy. They have fewer problem loans and are narrowing the gulf between interest rates charged borrowers and interest rates paid to obtain funds. They are gaining new sources of income, such as mutual funds and securities trading, and are also becoming more profitable through acquisitions. Nevertheless, uncertainty over interest rate changes will give the group only modest stock price gains over the long term.

Consolidation is the name of the game in the food processing industry. Processors are acquiring companies and merging primarily to boost market share; secondarily, to diversify. With developed markets mature, the best growth opportunities are in the emerging markets of Latin America, Asia and Eastern Europe, where food processing infrastructure is lacking. Most food stocks are flat, but investors should consider issues with 1 and 2 Safety ranks.

The grocery industry is flourishing, presenting investors with several opportunities. Since late 1993 grocery stocks have exceeded market averages, on the strength of cost savings from Efficient Consumer Response and other logistics initiatives. Although highly leveraged, grocers have used low interest rates to refinance debt and are using excess cash to pay this debt off. Traditional outlets, although hard-pressed by supercenters, will maintain their market dominance.

The soft drink industry registered impressive sales gains internationally and in the US in summer 1994. Coca-Cola, for example, boosted international case volume 17%. Over the long term, these gains are not sustainable, but should still average 7% to 10% annually abroad and 2% to 4% in the US. The biggest gains in 1994 occurred in the non-cola segment. The group as a whole has an attractive 3- to 5-year investment potential.

The packaging and container industry will continue to be competitive, especially in third-world countries, but merger activity in the industry has slowed considerably. In the beverage container sector, aluminum cans seem to have staked out a major portion of the soft-drink container market, leaving the upscale beverage market to glass container manufacturers. Investments in this industry have good prospects over the short and long term.

The furniture and home furnishings industry should experience modest earnings gains, despite increasing mortgage rates and a slowing of home building activity. Interest rates continue to be low historically, which should not cause a dramatic decrease in home purchases. The residential furniture sector continues to be dominated by manufacturer-retailer alliances, and office furniture suppliers are becoming more automated and focusing on the development of ergonomic products. Investments in this industry have suffered double-digit losses in 1994, a situation not likely to improve in 1995.

An evaluation of the rate of return for various oil company stocks. There is also an evaluation of the downstream operations of various companies because of a decrease in petroleum prices and a change in laws governing the industry. A decrease in refinery production and a decrease in the number of service stations has also resulted. The electric automobile will probably not be a cause of concern for the industry.

The food processing industry is expected to experience weak prospects as a result of an improving economy and increasing competition in the food reseller market. Investors are shunning defensive investments and instead are concentrating on cyclical and capital-intensive companies. Competition from distribution points such as warehouse clubs and mass merchandisers has led resellers to reduce inventories, which impacts the food processing industry. Few investments in this industry are promising, but conservative investors could profit from long-term gains from large-capitalization issues.

Industry analysts forecast that cement and aggregate industry stocks will be a good investment. The industry is operating at capacity and is facing a period of high demand. Foreign competitors have been given higher tariffs to curtail dumping of the product. Consumption, driven by infrastructure projects should increase by 6.8% in 1994 and the price of the product has increased by about $5 per ton. However, stock prices are low and could give a nice profit.

Sales of precision instruments will continue to grow through 1995, on the strength of the US economy and improved demand in Japan and Europe. Profits will increase even more than sales because of the industry's high fixed costs and cost-cutting measures undertaken during 1990-1991. Precision instrument stocks are a good, timely investment bet.

The variety of businesses within the financial services category make it difficult to predict the effect of rising interest rates on the industry as a whole. Consumer finance companies can raise their interest rates to balance their higher funding costs, but they may suffer from a weak demand for credit. Life insurance companies are less vulnerable to interest rate fluctuations because they pass the risk on to policyholders. Investment in the financial services industry is still a good long term investment, but most capital is likely to be put back into the business and not paid out in dividends.

Real Estate Investment Trusts (REITs) should be a good investment for the long-term, from 1994 to 1997 or 1999, but for the short term, interest rates may cause the assets of such investments to decline. Most REITs will offer price stability and income to investors, and some investors are buying them despite rising rates. Investors should examine those REITs with a stable history of FFO increases, rather than buy those with higher dividend yield.

Textile industry stocks will continue to show mixed results in 1994. Clothing textiles are not projected to do as well as other segments, which should be helped by automotive and home furnishing market turnarounds. The rising price of cotton is an unknown factor that could adversely affect stocks. Potential investors should consider Culp in the short term and Dominion and Cone for investments out to 1996-98.

Clothing industry stocks have been dropping relative to other industries, partly because of poor weather, high inventory and low sales. While the North American Free Trade Agreement could help turn the situation around soon, the industry will remain volatile. Potential investors should choose stocks with Predictability Ratings of 65-100, Financial Strength ratings of B plus or higher and average Safety ranks of 3 or higher.

The Canadian bank industry will have continuing increases in fee-related income but will probably suffer from low credit demand during 1994. Potential investors will find the industry a poor choice in 1994 because of slow growth and unfavorable prices. Prospects out to 1996-98 are not much better and in fact, many issues will fare below average as 2000 approaches. Consumer borrowing rates could change, however.

Food processing industry stocks are expected to do better in the long term and in international markets than in the short term domestically. The industry has an average Timeliness rank but several companies are good options for conservative investors. The price/earnings ratio has fallen below the historic norm for the industry. Large companies that are expanding in rapidly growing foreign markets include Wrigley, Sara Lee, Kellogg and Heinz.

Oil company stocks are unlikely to outperform the market in 1994. Oil prices seem unlikely to rise, given the combination of a surplus from the OPEC nations and reduced demand during the US and European recessions. The political problems of the former Soviet Union add an element of instability to any analysis, as it is impossible to predict its production or consumption levels. Oil stocks are at least as likely to decline as they are to remain stable.

Medical supplies industry stocks have remained somewhat unsteady while investors wait to see what the Clinton health care plan will look like. As the healthcare industry again begins making capital investments on equipment and supplies, stock prices should go up. The outlook for the industry has improved over the past few years, but volatility remains high, so investors should pay close attention to their stock's risk and safety features.

The textile industry has been adversely affected by the conservative buying approach retailers have taken during the recession and by higher inventories. However, the passage of the North American Free Trade Agreement will help open foreign markets and manufacturing possibilities. Meanwhile, textile prices have fallen, and some facilities have closed during the Nov 1993 holidays, and may also have to close over Christmas holidays. If interest rates remain low, new housing sales could have a positive affect on household furnishings and related textiles.