I just spent a lot of time looking at Blair.
The financial values are obvious. The disadvantages are less obvious:
1. Their (catalog) appeal (according to 10K) is to lower-middle income folks, who tend to be older. A lot of their assets are in receivables that might be of questionable quality in the next recession, as would be the outlook for their catalog response rates at that time. Their product is mostly clothing and their client base will just tend to make do with what they have in a recession.
2. The stock has been in a downtrend since 1993, which tends to confirm my fundamental point of view, and institutions hold a lot and have been sellers.
3. They are about to embark on spending a bunch of money on developing an Internet presence thru IBM. For those who hold the stock,
publicity surrounding this is probably the catalyst to get you out with a good return. However, their client base is probably the last people to use a computer for shopping.
4. Lastly, a personal observation, my wife is my consumer products consultant for these kinds of things. She does not have a clue about the stock market, but her judgment is excellent on this kind of stuff,
and I am usually wrong when I go against her. Anyway, she gets literally pounds of catalogs per week. (I know since they end up in recycling and I tie them up and lug them out <ggg>.) She knew Blair right away and said they are junky and she throws them right out without reading - which says something about the company that she still gets them, never ordering anything.
I don't think anyone will get hurt buying at $14 and some Internet press in 2000 might boost the stock. However, my considered opinion is that the basic business is not very attractive and not likely to change for the better.
Based on the financials of EBSC, your comments on their stores, and the active new controlling shareholders as a catalyst, I much prefer that one (except for the debt level). Roughly speaking, I think both
are selling at similar levels versus asset values at current prices and have the potential to earn about $2 per share, which would do a lot more for EBSC price than for BL. (Federated earns about 17% on tangible book value, which would be way over $2 on EBSC book, but perhaps requiring different management.) |
