(FORTUNE Magazine) – Bet you wish you had snapped up a few hundred shares of Chrysler back in November when Kirk Kerkorian, its largest shareholder, started badgering the company about boosting the stock price. Only three weeks after Kerkorian sent a much-publicized letter threatening action, Chrysler boosted its dividend 60% and announced a $1 billion stock-buyback plan for this year.

You can still grab Chrysler because the buyback hasn't kicked in yet, and you'll be glad to know there are other companies that have a strong incentive to be kind to shareholders. Most don't have a Kerkorian publicly telling them what to do, but like Chrysler, many are flush with cash while their stock languishes. Behind the scenes, institutional investors like big pension funds and mutual funds are putting serious pressure on some of these companies to increase the price of their shares. Says Peter Blanton, a vice president in Salomon Brothers' equity syndicates group: "A lot of companies are generating more cash than they expected to, and their share price isn't reflecting it because rising interest rates have put the stocks under pressure."

So what should you look for when trying to identify companies that are determined to raise shareholder value? Says Blanton: "Look for classic, maturing businesses that are cranking out the cash." Also, keep your eyes peeled for big stock-repurchase plans, significant dividend increases, and special situations that might light a fire under management to boost the stock.

Take a look at Philip Morris. The stock of the cigarette and packaged-foods giant has been hammered from a high of $87 per share only two years ago to around $57 now as the market frets over the country's growing antismoking sentiment. After rejecting a proposal by its last CEO to separate the tobacco operation from the food business, the company is finally responding to pressure from large investors. It has embarked on a massive $6 billion, three-year stock-buyback program and a 20% dividend increase. The company is also slashing debt, selling underperforming divisions, and consolidating its Kraft General Foods business. Look for more dividend increases.

The company should generate about $2.7 billion of excess cash this year. By some estimates that could rise to $3 billion by next year. Salomon analyst Diana Temple advises investors to buy the stock and estimates that its earnings per share could hit $6.40 this year, a 17% increase over last year's $5.45 per share. (For another take on Philip Morris, as well as Chrysler, see Portfolio Talk.)

American Express is another blue chip generating huge excess cash flow. Amex is already reaping the benefits of the major restructuring begun in 1993 by CEO Harvey Golub. This year the company should throw off roughly $1 billion in cash that it can use for acquisitions, investing in its current busi- nesses, and continuing its stock-repurchase program. Amex continues to cut overhead and hunt for new businesses that can help expand its revenues. Morgan Stanley analyst David Hilder says Amex could end up repurchasing another 20 million of its own shares this year. He has a $36 price target on the stock, which currently trades at about $30. Hilder recently raised his recommendation from "buy" to "strong buy."

One of the most compelling examples of a company with lots of incentive to create greater value for shareholders is media giant Viacom. This enormous, debt-laden company just completed its acquisition of Paramount Communications and Blockbuster Entertainment, and has been rapidly shedding some of its assets to reduce debt. Viacom now comprises a big cable television business along with movie studios, radio and television broadcasting companies, publishing operations, and the largest video rental and sales operation in the country.

For the latter half of last year, Viacom was one of the best-performing stocks on the market, rising 34% between June and the year-end. But that's not enough. The company is anxious to see its class B shares above $50 because of some provisions of its merger deals with Paramount and Blockbuster. The class B shares currently trade at about $44. (The class A shares give founder Sumner Redstone voting control of the company.) If Viacom's stock doesn't stay above $52 for 30 trading days between now and the end of September, it will have to issue another 17 million shares to the former Blockbuster shareholders. A similar deal applies to the Paramount acquisition, but in that case the hurdle is $48 for 20 trading days. Says Salomon cable industry analyst Frederick Moran: "At the rate they're going, there is a very good chance that Viacom could hit $60 in the next 12 to 18 months. The catalyst could be the sale of some of their cable systems, aggressive reduction of debt, and international expansion."

McDonnell Douglas is definitely working hard for shareholders. In late October the defense and aerospace giant said it would buy back 15% of outstanding shares and increase dividends 71%. It also split the stock three for one. Even with the huge cost of the share repurchase, estimated at around $850 million--or one year's free cash flow--McDonnell Douglas is expected to end 1995 with only about $700 million in debt vs. $4 billion in equity. Debt should fall below $200 million next year, assuming no further buybacks and no acquisitions, according to Morgan Stanley analyst Phil Friedman. He has knocked the company's rating up one notch to "strong buy."

THE YIELD HUNT GETS TRICKY

You're stalking the fixed-income markets for the rarest of beasts: one that can offer both safety and high returns to tide you through the years ahead. It seems to lie within your sights: a closed-end bond fund that offers professional management, diversity, and, often, double-digit yields. And because such funds trade like normal stocks, their share price is often less than the value of the bonds they hold. Today such funds trade at an average discount of 5% or so to their net asset value.

Though there are bargains, in this market it pays to know your quarry well. Sure, the discount is tempting, but remember these funds lost 14% last year. And even as recently as December, some were trading at discounts of 20%. Stability is not their strong point. Many are chock full of leverage, derivatives, or both. That can boost returns when a fund manager bets correctly but can also magnify a fund's losses. Just last month three mortgage-backed funds, run by Trust Co. of the West and Dean Witter Reynolds, cut their payout, resulting in a selloff that cost investors as much as 20% of their principal.

When looking for funds, calculate the yield yourself: Some funds offer variable dividends, so the figures reported in newspapers may differ from one another. And pay close attention to expenses. Thomas J. Herzfeld, who runs a closed-end money management firm, figures 0.8% or less is a reasonable amount, excluding interest costs. To ensure liquidity, 20,000 fund shares a week should change hands. That's a number you can get out of your newspaper. And try to make sure the fund's discount is three percentage points greater than its average, as well as larger than that of comparable funds.

Pay especially close attention to the use of leverage, which many funds use to boost returns. By issuing short-term debt or preferred stock and using the proceeds to buy more higher-yielding long-term bonds, many funds spice up their returns. But with short-term rates climbing, they stand to lose that power soon and thus will likely cut their dividends. Look for funds that shun leverage or keep enough reserves to maintain their dividend in the face of higher short-term rates.

One cardinal rule: Choose a market that you like before you dig for discounts. Says PaineWebber analyst Robert Lee: "If the asset class isn't attractive, I don't even look at the fund." Many of today's markets are tough nuts indeed. The economy has been slow to respond to the Federal Reserve rate increases. More tightening seems likely. Corporate bonds are paying out just 0.75% more than comparable Treasuries, hardly worth the extra credit risk they bring. And when the Fed finally does rein in the economy later this year, junk bonds will face the likelihood of downgrades by the rating agencies.

Treasury bonds would be a good buy, but there are no funds devoted exclusively to them. For the credit-risk-averse, funds investing in the debt of Ginnie Mae and Fannie Mae may do the trick. Donald Cassidy, closed-end fund analyst for Lipper Analytical Services, likes Excelsior Income Shares ($14.75), with more than 50% of its assets in such bonds and most of the balance in high-grade corporates. The fund is yielding 8.1% and sports a discount to net asset value of 13.4%, almost twice that of the average of its nonleveraged government bond fund cousins.

Mortgage-backed securities also hold promise: Those with expected maturities of seven years are yielding a full percentage point more than comparable Treasuries. And with rates rising, prepayment risk is dwindling. Editor John Dyrek of the Income Advisor newsletter likes the Pimco Commercial Mortgage Securities Trust ($11.38). At least 65% of its holdings are in investment-grade commercial mortgage banks. The fatter payouts help dampen the fund's sensitivity to interest rates, as does its relatively short duration of under five years. The fund is yielding 9.9% and trades at a 9.1% discount to its net asset value. And though the fund does use leverage, last year it lost just 5% of its net asset value. Says Dyrek: "It's incredibly stable for a closed-end bond fund."

For high-income types, assuming any flat-tax proposal falls flat, municipals hold the brightest future. Muni issuance should drop again this year, according to Vincent Giordano, senior vice president of Merrill Lynch, and that should drive up demand. And for those in the 39.6% tax bracket, a fund throwing off a piddly 6.0% will earn its owner at least 9.9% in tax-equivalent yield. Wary of Orange County-like eruptions? Then steer clear of single-state funds, where such events can do the most damage. For a plain-vanilla muni fund, analyst Lee recommends the fixed-term Nuveen Select Tax-Free Income Portfolio 2 ($13.75). It sports a 6.6% yield, a discount of 2%, and investment-grade bonds.

- Richard S. Teitelbaum

NEW ACTION IN OIL AND GAS

With the unseasonably warm winter, and gas storage running at high levels, share prices of energy companies have been pushed down by collapsing natural gas prices. But the declines have some investors sniffing opportunity. Says Jeff Robertson at Rauscher Pierce Refsnes: "The long-term trend is up for gas prices, and at these levels, the chance for positive surprises on gas outweighs the negatives."

And gas is only part of the picture. The current price of $18.25 a barrel for West Texas Intermediate crude is high enough to encourage drilling and is expected to remain firm. Even if it doesn't go higher, stocks may rise at companies that are enriching themselves by rapidly increasing production and reserves.

Independent energy producers like Louisiana Land & Exploration and Parker & Parsley Petroleum are extracting surprising amounts of oil and gas from picked-over properties bought cheaply from major oil companies or from smaller, less efficient outfits forced to unload them. Also, independents have more than instinct to rely on. Improved technology like 3-D seismic equipment is lowering the risk of dry holes.

Louisiana Land, based in New Orleans, is exploring for oil and gas mostly in the Gulf of Mexico and southern Louisiana, but also in the Rocky Mountains, the North Sea, Indonesia, Colombia, and Canada. Total reserves are estimated at 275 million barrels, 60% natural gas and the rest crude. This year the company will aggressively drill its 600,000-acre Louisiana property. It plans 16 wells. The company also has a big position in a potentially world-class prospect in the Gulf of Mexico called the "sub-salt play"- oil was found under horizontal salt sheets after conventional wisdom had overlooked it. David Bradshaw at PaineWebber thinks the $38.50 stock, which pays a $1 dividend, could be in the low 50s in a year.

More than 80% of reserves for Parker & Parsley, based in Midland, Texas, are in the Permian Basin in West Texas, the Anadarko and Arkoma basins of Oklahoma, and the Gulf Coast area of South Texas. Reserves total 296 million barrels, 51% oil and 49% gas. The company made two major acquisitions last year, giving it up to 500 additional drilling locations for the next several years. Philip Kehl at Dean Witter Reynolds thinks the $19.50 stock could be $30 in a year.

Investors looking for a purer play on oil should consider the stocks of Triton Energy or Union Texas Petroleum. Dallas-based Triton, which has hardly any natural gas, has close to a 10% stake in two major oil fields in Colombia's Llanos Basin. Output, just beginning now, is expected to reach 185,000 barrels a day within a year, with potential production of at least 500,000 barrels by late 1997. Tom Driscoll at Salomon Brothers expects Triton's cash flow to be just over $1 per share this year, but he estimates that it will jump to $7 by 1998. He thinks that the $32 stock will be at least $40 in a year, and that it could be $70 in three years.

Union Texas may be a good buy now, since its stock fell 12% when gas prices dropped, even though the company has no U.S. gas production. It operates mainly in Indonesia and the North Sea but plans to drill at least nine exploratory wells this year from Alaska to Tunisia. Also, it will get a boost from petrochemical operations, where earnings could triple this year. Chris Eades at NatWest Securities thinks the $19 stock could be $25 in a year.

The independents aren't the only promising energy plays. With the long-term outlook for drilling improving, the stock of Schlumberger, the world's largest oil service company, with 1994 revenues estimated at $6.7 billion, should get a lift. Wesley Maat at NatWest Securities thinks the shares, recently at $54, will be at least $60 in the next 12 months.

- John Wyatt