Q. Can shares of Saks Inc. continue to increase? - RF, via the Internet

A. This luxury retailer, which has been enjoying a rise in sales, is positioned to benefit as shoppers emerge from recession.

Its stock is gaining lustre thanks to the company's improved ability to effectively control its costs.

Following a disappointing 2008 sales season, Saks focused on improving operating margins through less discounting, reducing inventories and adding some less-expensive merchandise. It has succeeded in its goal, though its margins still lag behind traditional rivals such as Nieman Marcus and Nordstrom.

Shares of Saks are up 49 percent this year following last year's 50 percent increase. Saks is sometimes mentioned as an attractive acquisition target based on its respected brand and extensive real estate holdings.

The stylish upscale retailer is taking further steps to improve its prospects:

— New product lines have been introduced this year that will boost the percentage of exclusive brands in its product mix from 10 percent to 20 percent.

— A new online order fulfillment system has been implemented at considerable cost, with the aim of eventually reducing the time it takes to package and load online orders to 17 hours.

Saks receives a consensus recommendation between "buy" and "hold", according to Thomson Reuters. That consists of three "strong buys", two "buys", three "holds", two "underperforms" and one "sell".

Though Saks has gone through several ownership changes over the years, its history as a leader in designer fashions dates back to its 1924 launch by Horace Saks and Bernard Gimbel. It currently operates more than 50 Saks Fifth Avenue department stores; more than 50 off fifth stores that sell off-price merchandise; and its site saks.com

Saks has international stores located in the Middle East, Mexico and China. Last year it discontinued its Club Libby Lu specialty stores for young women that it acquired in 2003.

Stephen Sadove, named CEO in 2006 and chairman in 2007, was chief operating officer for three years before his promotion. He had worked 25 years in the consumer goods industry prior to joining Saks. Under his direction, losses have been narrowing, though debt remains substantial. Saks lost $57.9 million in the year ended January 30, 2010, compared to a loss of $158.8 million a year earlier.

The forecast of a five-year annualised earnings gain of 10 percent compares to 12 percent projected for the department store industry, according to Thomson Reuters.

Q. Please share your thoughts about Oppenheimer Global Opportunities Fund. Is this a good choice for overseas investment? - BF, via the Internet

A. Keep in mind that this world fund keeps nearly half of its holdings in US stocks, so if your goal is overseas investment you might try a fund with a portfolio of purely foreign stocks.

This fund can also be quite volatile at times, though its track record is excellent and it has an experienced manager with a proven ability to spot trends.

The $3 billion Oppenheimer Global Opportunities Fund is up 62 percent over the past 12 months and has a three-year annualised gain of two percent. Both results rank in the top 5 percent of world stock funds.

"We've recommended Oppenheimer Global Opportunities for several years, with the warning that it is one of the more volatile choices and investors must be prepared for it to take on some very different looks (in portfolio) at times," said Karin Anderson, analyst with Morningstar Inc. in Chicago. "It is a supporting player in an individual's portfolio."

Portfolio manager Frank Jennings, in charge since 1995, makes his long-term portfolio choices based partly on themes. He uses the acronym MANTRA to focus on themes of "mass affluence, new technologies, restructuring and aging" in his selections. Jennings has strong convictions and can sometimes make major bets on certain stocks based on those convictions. He also has a heavy portfolio weighting in mid and small-cap stocks.

"Jennings has the leeway to go into bonds as well, which he hasn't done much of lately," added Anderson.

"What has set this fund apart has been his willingness to load up on his top stocks, though more recently he's been trying to limit them to around 10 percent per stock."

Software and healthcare each represent about one-fifth of the portfolio, with other concentrations in industrial materials, consumer services and consumer goods. Largest holdings were recently the US stocks Advanced Micro Devices, Nektar Therapeutics, Rambus, Sotheby's Holdings, Cepheid and American Semiconductor. Top holdings also include the United Kingdom stocks Autonomy Corp., ARM Holdings and Electrocomponents.

This 5.75 percent "load" (sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.33 percent.

Q. Why invest in TIPS? - FB, via the Internet

A. You invest in TIPS to blunt the potential effects of inflation.

Treasury Inflation Protected Securities, or TIPS, are indexed to inflation and carry low risk because they are backed by the US government.

The principal increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When the TIPS matures, you are paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year at a fixed rate.

"I'm not using TIPS right now because I don't think inflation is going to aggressively rise," said Paul Nolte, managing director with Dearborn Partners in Chicago. "Now, if I expected inflation to rise in the next year or two, I would consider TIPS a good purchase."

TIPS are sold directly through the TreasuryDirect system in $100 increments with a minimum investment of $100. There are five-year, 10-year and 30-year maturities. TIPS can also be purchased through mutual funds that invest in them.

Income from TIPS comes from interest payments and any annual inflationary increase in the principal value of the bond. Gains are exempt from state and local taxes but not federal taxes.

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

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