An Appraisal: Restructuring Game Can Still Be Profitable for Investors
T. Boone Pickens Jr. and Carl Icahn aren't the only ones who can make a buck by playing the restructuring game.</br></br>Investing in companies that are revamping their businesses -- or whose industries and competitive environments have changed so much that they might revamp -- is still a way for investors to earn superior results in the stock market this year, analysts and portfolio managers say.</br></br>During 1985, company after company bought back shares, sold unprofitable units or went private through leveraged buyouts -- all of which are restructuring maneuvers. And the restructuring trend will continue, says Michael Metz, a portfolio strategist with Oppenheimer & Co., because corporate managements are "still under pressure to maximize return" on assets.</br></br>He points out that money is plentiful for share repurchases because companies aren't using their funds for other things; capital-spending projections for 1986, for instance, are even with or slightly below 1985 levels. Money also is plentiful for leveraged buyouts of whole companies or units; banks, which are making fewer loans for operations or expansions, are willing to lend for buyouts and other restructuring programs.</br></br>Mr. Metz concedes there are "less ravishing bargains" in the stock market these days. The 1985 drop in interest rates and relatively moderate level of inflation has pumped price/earnings ratios and raised valuations for many issues in the market, which makes stock buybacks and acquisitions more expensive.