Q. I am surprised that discount chain Target Corp. hasn't done better in the economic downturn. What are your thoughts? - DP, via the Internet.

A. The consumer-spending slowdown and preoccupation of shoppers with finding the lowest possible prices hasn't worked to the benefit of this discounter known for its sense of style.

Wal-Mart Stores Inc. and other discounters more firmly focused on basic necessities have fared better.

Acknowledging this, Target is aggressively touting prices in its spring advertising. At the same time, it is increasing shelf space for food, household, health-care and beauty products, while expanding its private-label brands.

Net income in Target's most recent quarter tumbled 41 percent. Most worrisome was the fact its credit card segment suffered a $135 million pretax loss after the company added $245 million to its allowance for doubtful accounts.

It is cutting about 600 jobs at its headquarters, leaving another 400 positions unfilled and closing an Arkansas distribution center. The company reduced its expected capital spending for 2009 by $1 billion.

Shares of Target (TGT) are down five percent this year following declines of 31 percent last year and 13 percent in 2007. Both Moody's and Standard & Poor's ratings services recently changed its outlook to "negative" from "stable", citing sales weakness and the problems with its credit card portfolio.

In a serious challenge, activist investor William Ackman, whose hedge fund owns 7.8 percent of Target stock, has launched a proxy fight to replace five directors with him and four allies. Ackman was successful in his efforts to have the retailer initiate a $10 billion stock-buyback plan in November 2007 and sell half of its credit card receivables in May. But Target's board rejected his plan to have the company spin off its land but keep its buildings.

Analyst recommendations on Target shares, according to Thomson Reuters, consist of three "strong buys", three "buys", 12 "holds", one "underperform" and one "sell."

Chief executive Gregg Steinhafel added the chairman's position of the 1,600-store chain this year when former CEO Bob Ulrich retired and became chairman emeritus. Mr. Steinhafel has been with the firm since 1979.

Earnings are expected to decrease 12 percent in the fiscal year ending in January and increase 21 percent the following fiscal year. The five-year annualised growth projection of 12 percent is in line with the forecast for the discount variety stores industry.

Q. Dreyfus Appreciation Fund was recommended to me. What is its outlook? - BK, via the Internet.

A. There's nothing fancy here. It is a straightforward fund featuring big brand-name stocks, a proven research team and moderate costs.

The $2 billion Dreyfus Appreciation Fund (DGAGX) is down 27 percent over the past 12 months and had a three-year annualized decline of 11 percent. Despite those declines, both results rank in the upper one-fifth of large growth and income funds.

Its return beats the Standard & Poor's 500 index over the trailing 15 years.

"We recommend Dreyfus Appreciation Fund as a very good core holding that could complement a small-cap fund," said John Coumarianos, analyst with Morningstar Inc. in Chicago. "It is very tax-efficient because it hardly ever sells stocks, though the slight drawback is that it can sometimes hold onto stocks that have become overvalued."

An investment committee that includes Fayez Sarofim, Charles Sheedy and Christopher Sarofim has decades of experience and benefits from more than a dozen supporting analysts. The fund holds more consumer-goods companies and fewer technology names than typical large growth and income funds. High-quality earnings, clean balance sheets and extensive free cash flow are the committee's preferences.

"It doesn't own financials, which has helped tremendously lately but could mean it lags whenever the credit crisis subsides and banks get healthy again," Mr. Coumarianos said, noting that it could also suffer in periods when smaller stocks lead a market advance. "In 2008, it still lost money, but it did better than most, and its strategy has generally worked out really well."

Consumer goods and energy each represent about one-fourth of the fund's assets, with health care and industrial materials other significant holdings. Its large weighting in energy does entail some risk, though its stocks of giant companies such as Exxon Mobil Corp. are usually less volatile than the smaller energy firms.

Dreyfus Appreciation Fund's largest holdings include Exxon Mobil, Philip Morris International Inc., Procter & Gamble Co., Nestle SA, Johnson & Johnson, Chevron Corp., Coca-Cola Co., ConocoPhillips, McDonald's Corp. and Intel Corp. The "no-load" (no sales charge) fund requires a $2,500 minimum initial investment has an annual expense ratio of 0.95 percent.

Q. What is the most expensive individual stock? How much has the market decline affected its price? - WY, via the Internet.

A. A lofty price tag is not bulletproof protection against stock market declines, even if you're talking about shares of a company whose CEO is billionaire investor Warren Buffett.

Berkshire Hathaway Inc. Class "A" (BRK-A), recently trading at around $88,500, is the highest-priced stock. It is down about eight percent this year, following a drop of 29 percent last year.

Those shares had closed at an all-time high of just under $150,000 in December 2007.

Berkshire Hathaway Class "B" (BRK-B) is less expensive but still costly at around $2,922 after absorbing similar declines. Class B shares carry the rights of ?0th of the Class A shares, but just ½00th of their voting power.

"Buffett wants shareholders to be long-term investors and not short-term traders," said Sam Stovall, senior investment strategist with Standard & Poor's Corp., explaining why Buffett resists splitting the stock to make its price more affordable, as many other companies do.

Mr. Buffett's investment partnership bought Berkshire stock for $7 in 1962 when it was a textile company. He made it his investment vehicle seven years later. Today it is a holding company owning more than 70 companies and a large investment portfolio.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N Central Ave., Suite 302, Phoenix, AZ 85004-1248, or by e-mail at andrewinv@aol.com

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