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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (2546)	11/28/1997 2:45:00 PM
From: jeffbas	Read Replies (3) of 78614

More info on CALM: IPO at $7.00 about a year ago - no sponsorship or big firm coverage, which is a bit surprising for a $300 million company which is major factor in fragmented industry. Book value of $5.50. No good will. Has a controlling shareholder. $35 million untapped bank line of credit. Debt on balance sheet is largely insurance company financing or municipality type stuff. (I am always impressed to see insurance companies in there with private placements - they are the true debt financing experts.) I think earnings this fiscal year ending 5/31/98 will be between $.75 and $1.25, down from about $1.20 last year. I have heard some analyst say between $1.00 and 1.40. I believe that for their current operation the commodity cycle earnings range is between a little below zero and $2.00 per share. They have been acquiring companies that fit into their territory and building new facilities for years - so recent stuff is not new. Company goal is to be something like triple the size in 5 years or so as they continue what they are doing. NOTE - They typically pay book for the companies they buy which is why they have no good will. And that is about what they sell for themselves. However, a large player has all sorts of advantages, including access to reasonable cost financing and efficient distribution, that warrants a higher price. They believe that as the industry rationalizes - getting rid of mom-and-pop farms the cyclical swings will be less. Industry growth is minor, at this time. Competitors are mostly the type of farms they have been buying. The public company with the largest % of sales as egg operation is MIKL (about 1/2). Company has been around a long time and longtime mgmt. My opinion is and has been that this will eventually be a much larger company with double the earnings and double the P/E, as it gets recognized --> 4 times the price. So far I have been wrong. But as Buffett says about his not caring if Wall Street closes down for 6 months, I do not follow this stock daily or spend any time worrying about it. It certainly is not a stock for the impatient. I suggest you go read the latest 10Q for CALM and MIKL, and lets discuss further.

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