HOLD RECOMMENDED FOR A.G. EDWARDS STOCK

St. Louis-based A.G. Edwards Inc. and Edward Jones with offices in Cape Girardeau are among the investment industry beneficiaries of the "raging bull" market of the past few years. Both have been featured in financial publications in recent months for their successes, but you and I can only consider investment in one of them. A.G. Edwards was incorporated in 1983, and its common stock is traded on the New York Stock Exchange under the symbol AGE. Edward Jones, on the other hand, is a limited partnership owned by its associates.

A.G. Edwards Inc.'s roots reach back to the post-Civil War era when A.G. Edwards and his eldest son, Benjamin Franklin Edwards, formed Edwards & Son. That partnership served as a broker handling trades on the NYSE for St. Louis banks. It bought its first seat on the NYSE in 1898 and opened its first Wall Street office two years later. Following WWI, the firm began to focus on middle-class investors and handled its first IPO (initial public offering) in 1925.

In 1938, A.G. Edwards' NYSE floor manager, William Martin, was elected as the first paid president of the exchange. Having survived the recession of the 1890s, the crash of 1929, the Depression and WWI, the firm was ready to grow. By 1940, the company had grown to six offices but was forced to close four of them during WWII. There were 19 branch offices and 200 brokers by 1960 and 44 offices by the mid-1960s.

A public offering of A.G. Edwards & Sons' common stock was made in 1971, and the company grew to 450 offices by the early 1990s and more than 560 offices today.

Under the leadership of Benjamin Edwards III, great-grandson of the founder, the firm has maintained its focus on middle-income investors and quickly acted to upgrade computer services for brokers and clients. It has satellite-based communications with its branch offices. In 1994 it introduced a computerized bond processing system and the Edwards Information Network and set up a world wide web site in 1965 to give investors access to investment information.

The holding company, A.G. Edwards Inc., was formed in 1983. It controls the A.G. Edwards & Sons brokerage firm, AGE Commodity Clearing Corp., A.G. Edwards Trust Co. and Gull-AGE Capital Group.

The company's stock price has grown from the $15 range in early 1995 to about $40 on a split-adjusted basis. It split 3-for-2 on Oct. 1 and has continued its upward trend.

At $40, the price earnings ratio (P/E) is about 15.4. The industry average P/E is 17.5, suggesting the price should be about $45 1/2. My research suggests a price of $44, so we can conclude that A.G. Edwards' stock is very slightly underpriced.

There are two broker analysts making recommendations on this stock. One of them rates it a "buy." The other rates it a "hold."

If I owned A.G. Edwards Inc. stock, I would certainly hold it because there is still some room for appreciation. As a value investor, I would be reluctant to buy it with so little potential price appreciation available. If I were looking for a brokerage industry stock to add to my portfolio, I would take a closer look at Bear Stearns or Paine Webber because both of them appear to offer more value at this time.

Dividend Reinvestment Plan: No

Web Site:

http://www.agedwards.com

Bill Walker is president and CEO of Walkrich Investment Advisors and completes a market appraisal of more than 5,000 common stocks each week. (573) 651-9196 (walkrich@mvp.net)

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.