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Strategies & Market Trends : Value Investing
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To: Wallace Rivers who wrote (2052)10/1/1997 3:50:00 PM
From: Ron Bower   of 78667
 
Wallace,

As I read the dip in revs for JWC:

They had a $2.8M decline in commission revs from the prior year. 1996 was an exceptionally strong trading year for them. This is not a major part of their operation nor is it highly profitable. Associated with and partly a cause of the lower commissions is the $2.5M decline in market making activity. This is a major part of their business. The early part of this year wasn't conducive to IPO and stock offerings and most firms had a decline in this business. This market is now getting stronger and I would think JWC would benefit.

Revs & earnings were hurt by AGRO losses and lower stock price. They had a 25% stake. This is the primary reason they decided to take it over. AGRO had $4.7M liquid assets that now go into JWC. The benefits of this added liquidity should show up next Q.

Earnings were also hurt by the costs to open the NY branch without offsetting revs.

In spite of the lwoer revs and extra costs, earnings only declined 137K and EPS increased by 36% due to the buyback. BV/S increases about 10% with the AGRO acquisition.

As I posted, this is not your average brokerage that relies heavily on trading activity. They have a core of clients that rely on them for money management and, with the alliance to Bear Stern, a strong market making business. They are primarily a Florida brokerage dealing with a select group. While they might not perform as well in a strong bull market, they won't suffer much when the bears come out. One of the reasons I like it.

My take on it,
Ron
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