I have a few comments:
To James, the two point drops on light volume that you noted are easily explainable based on the way the OTC market works. When market makers hear of blocks for sale they run the other way, sometimes propelled by "SOES bandits", until a market clearing
price is reached where someone will take the block.
As to the fundamentals, the CFO Greenlaw finally found the time (about a week ago) to return my call (of a while ago) from an Atlanta airport line. This tells me the guy is very busy and is only able to call a shareholder with a noticeable amount of money in the stock back when the time has no other valuable purpose. But he did call back!
I took the interpretation from the conversation that there is nothing fundamentally wrong with the company. The most interesting thing I learned is that he does not consider himself as in the same market as
JBIL, SCI or SLR, which he looks at as high volume lower priced product manufacturers focussing on the top 50 companies. He is
a low to medium volume higher priced product company where he is
serving the top 1000 companies, and considers BHE a peer.
He still sticks with a growth rate 5% better than industry average, which was discussed as 30% vs. 25% for industry.
Paul, I also asked him about your thesis that in 2-3 years only worldwide operations with 2-3 billion of sales will be survivors. I believe he subscribes to that thesis for the SLR type companies,
but believes that there will still be room for his niche type companies.
I believe the stock has attracted some concern because of the concentration of risk with BAY and because it has downside momentum - "so something must be wrong".
Note that in both 1996 and 1997 the price hit just about 30 times the
projected earnings for each year as the high for the year. That would
be at least the $58 mentioned in the Shroder recommendation for 1998, that was issued last month. I also believe that recommendation,
which I have read and is thorough, would not have been put out on 9/16 at 33, after the stock had dropped a bunch already, without the analyst having talked to Mr. Greenlaw to make sure that he was not sticking his head in a noose from a fundamental point of view.
I can't predict the future. However, when I spoke to him, I believe he
was optimistic about the future; and I bought more stock more than once today. The lowest forecast for 1998 is $1.95. A very low p/e
on that a year from now would be 20 times, which is a 35% gain from the current price, a lot better than the market on the whole is likely to do. Of course, if the stock comes back to favor the p/e of 30 mentioned above would give a double, better potential than any other ECM stock, in my opinion. |
