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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.

The economic fluctuations of the furniture and home furnishings industry depend heavily upon the actions of the U.S. Federal Reserve Board, but many high-end home furniture manufacturers remain solid investment opportunities. The majority of this industry will be affected by any change in the consumer interest rate, but office furniture manufacturers continue to benefit from the large upswing of activity in the small office/home office market.

Oil prices have decreased following a solid beginning in 1997, but low oil prices are making certain US refineries more profitable. The demand for oil is expected to remain solid, and the existing supply is expected to meet the demand. This is likely to keep oil prices within a limited trading range. Refining margins are also expected to fall due to changeable oil and product prices. Investments in US refineries present conservative investors with a relatively secure three- to five-year total return potential.

The Federal Reserve's decision to raise short-term interest rates by 1/4% is expected to have a major effect on the home construction industry which will be reflected in the home furnishings and furniture industries' economic performance. Most industry observers expect that with fewer housing starts there will be fewer furniture purchases, but some predict the possibility of future interest rate boosts may inspire immediate purchases. The office furniture industry should perform well for investors and be unaffected by interest rates.

There appears to be an adequate supply of oil to meet the annual 2.5% to 3% demand for oil worldwide in the mid-1990s, resulting in stable prices for the industry. However, fresh sources need to be found to meet demand in the future. Exploration and production are the main industry focuses, but some refiners are suffering from overcapacity. Earnings for the 1st qtr of 1997 will be moderate, and there are several good petroleum shares for investors.

The furniture/home furnishings industry is doing favorably in early 1997, especially the industrial sector. The timeliness of investments in the industry is high in early 1997 compared to low in mid-1996. Companies in office furniture manufacturing, hotel/motel furnishings and restaurant furnishings are outperforming the other parts of the industry.

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.

Oil prices have risen in 1996 with the renewed armed conflict in the Middle East. The prospects for oil company earnings in 1996 are good with the expected demand for oil and strong prices, but may decrease in 1997 with increased supply from Iraq and a slower US economy. There has been excess capacity in the refining business and margins may be difficult to sustain. Financial strength, stability, and size make these stocks a safe investment.

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.

Economic recovery was absent from the furniture/home furnishings industry during the 2nd qtr of 1996, although interest rates were stable and housing starts increased. Sales and earnings for the 2nd qtr of 1996 have also been weak, even though results have been aided by cost-cutting efforts and by manufacturers' inventory reduction. There are few timely stocks in this industry, although several have potential from 1996 through 1999-2001.

Petroleum industry earnings and stock prices have risen with increased oil prices, smaller petroleum inventories, and a colder winter in 1996. Demand for petroleum products is increasing and may overtake supply by the end of the 1990s. Industry earnings are expected to be good through 1996 and 1997, even though oil prices may be volatile for the same period. These stocks have appeal for conservative investors through 1999-2001.

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.

Supermarket chain earnings are expected to remain strong and the grocery industry will continue to show double digit growth throughout 1996 and 1997. Investors should be aware that many supermarket chain equities have doubled or trebled in the past few years and that many stock prices are expensively valued based on price/earnings multiples. Smaller grocery chains that have a history of expansion and plan to continue adding stores may be a better investment than larger chains that are relying on improving operations to increase growth.

Rising corn, wheat and grain prices have affected the profitability of some food companies sufficiently to make investment in their securities questionable but have left other food companies unscathed. Hardest hit have been the meat and poultry companies who rely on grains for feeding stock, causing beef prices to drop and the poultry industry unable to cut prices as the consumer demand for beef rises. Surprisingly, ready-to-eat cereal, bread and pasta industries are untouched by the wheat and grain shortage.

The soft rink industry showed a 4% growth in 1995 and for the 1st qtr 1996 and experts predict that the trend will continue in the 3%-4% range throughout 1996. Larger companies can expect 8% growth in the international market and new products, such as teas and fruit juices are expected top boost sales. Although stocks have performed poorly industry wide, most individual soft drink companies can claim good stock performances and investors can expect better than average performance for the next 3-5 years.

The household products industry is not as resilient as it used to be and its stocks are not as wise an investment as they used to be. Its profits are not growing as effortlessly due to a decrease in consumer demand for housewares. Mass merchants are forcing manufacturers to follow their demand guidelines. Consumable products companies are wiser investments.

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.

A stronger economy, lower interest rates and more home sales will benefit the furniture and home furnishings industry. Sales have not been good during the 1990s for the industry. Furniture and home furnishings stocks are not expected to do well during 1996. Investors will need to wait a few years for any changes for the better.

Prices for oil climbed higher in Mar 1996 to $25-a-bbl, but may recede to $18-$18.50-a-bbl with adequate supply, over-production from OPEC countries, and larger amounts of crude oil from Latin America. There has been pressure on profit margins for US and European refining companies in recent years due to capacity, but this is improving. These stocks provide investors with good dividends, safety, and a good return over the next three to five years.

Short-term investors in the restaurant industry will likely be disappointed in the 1st qtr 1996 but find earnings better in the spring. Longer-term prospects are better for the industry, as the trend among two-income families to eat out continues to gain momentum. Three rapidly growing specialty chains are being tracked for the first time by Value Line: Boston Chicken, Papa John's International, and Lone Star Steakhouse and Saloon.

Potential investors in the medical supplies industry should be cautious and carefully check individual Timeliness and Safety rankings. Although the industry is attracting interest with double-digit earnings growth in some cases, it will be affected by the effects of information technology and the potential restructuring of the FDA merit watching system. Consolidation is likely in the manufacturing sector.

The soft drink industry is expected to grow in 1996, especially in the international market. India, China, and Eastern Europe are among the more interesting areas of expansion for Coke and Pepsi, but Mexico's devaluation of the peso has made this a problem market for both companies. New forms of packaging has been one growth factor, also. These stocks can be expected to outperform the market for the next three to five years.

The grocery store industry is expected to have good earnings and profit margins in 1996. Unit costs are being reduced with economies of scale, and there are increased sales with higher product turnover and better inventory control through technology. Margins are also expanding with better product mixes, but overcapacity could result from expansion. There are several stocks, expansive and defensive, that are good investments.

Consumer awareness concerning weight is making sugar-free, fat-free, and reduced-fat a growth category in the food processing industry. There are FDA regulations for these foods now, and the number of foods in this category is likely to increase. Research and development are expected to improve quality and taste of these foods, as well. Few of these stocks will outperform the market, and investors should select the most timely.

Stocks in the household products industry are no longer as defensive as they once were, and have a low timeliness ranking for 1996. Computer-based inventory models are now widely used by retailers and product inventories are not as highly stocked as before, and consumers are not spending at previous levels due to personal cost-cutting. Investors should consider these stocks only on an individual basis.

Margins in the container and packaging industry are under pressure from higher raw materials prices, especially for aluminum and and paper. There is also less demand for consumer food and industrial cans, and this is having an effect on earnings. The industry has matured and consolidation is expected to increase, due to economic necessity. These stocks are not timely for 1996, but several may have earnings potential in the future.

Delayed home buying and furniture purchases by consumers caused share prices in the furniture and home furnishings industry to drop in 1995. Lower interest rates are expected to have a positive effect, however, in the future. Most manufacturers have high fixed costs, even with the impact of automation on workforce reduction, waste, and accuracy. There are very few timely stocks in this industry for investment in 1996.

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.

Worldwide petroleum demand for 1995 will average 69.5 million barrels per day. This will continue in 1996, especially in the Pacific Rim and Latin America. North Sea production appears to ensure adequate supply. OPEC is meeting in mid-November 1995 to set member production quotas, and this will affect market share and prices. These stocks have good yields and are safe investments for the next three to five years.

Restaurant industry stocks have a mixed performance record for the Jun qtr of 1995. Same-store sales, a common measure for restaurant results, appears to have softened since Jun 1995, and this could cause problems for some of the weaker companies in this competitive industry. Several stocks, however, will outperform the market in 1995 and 1996 and investors should select those with good balance sheets and successful operations.

Automation in medicine is the most notable trend in the medical supplies industry during the 1990s. Electrophysiology is the area where the greatest advances have been made in the last four years, along with new therapeutic delivery systems. New products and a weak dollar have kept these issues favorable. Medical supplies stocks are expected to show 10%-15% earnings growth, stable margins, and rising sales.

Soft drink sales are expected to continue growing at a 3%-4% rate through 1995 and 1996 in the US. International sales, especially for PepsiCo and Coca-Cola are expected to do better. Non-cola brands are strong, even though Coke and Pepsi have increased market share, and industry consolidation is increasing competition. Soft drink industry stocks will outperform the market for the next three to five years.

Supermarket profits are being pressured by lower food prices and increased competition. Debt reduction, inventory control, improved technology, and cost cutting are now top priorities in this industry. Increased floor space and store replacement are major capital expenditures. Most stocks in this industry will perform well, but investors need to consider demographics and regional economies before committing funds.

Supermarket chains are expanding private-label products, both in variety and quality. This has kept prices for brand-name products low, even though market share has not increased. Food companies are more active in new product introduction and increasing their markets in Eastern Europe, Latin America, and Asia. Several of these stocks are timely for conservative investors for the next three to five years.