OPTIONS AND PORTFOLIO UPDATE
Max, you have to be cleared for options trading by your broker and you will have to sign some forms if you have not done so already. Option trading is very risky as you know. The Amigos have loaded up on DHI May 22.5 calls. This means that on the third Fri. in May, whatever the stock closes at over 22.5 is what the price of the call will be worth. If the stock closes at 25, the options will be worth 2.5, for example. Right now, there is a premium in addition to the intrinsic worth (inherent value is the current value of the stock minus the strike price). There are also adjustments made to the price for volatility of a stock. The DHI May 22.5 hit a new high of 1.75 during trading today. There are different strike prices and exercise dates to concider before purchasing.
Portfolio update:
angelfire.com
It looks like DHI is on the move behind the scenes!!!! It appears to be one of two companies courting WBB!!!! Check it out. Put up news for WBB on Yahoo.
Having just completed an aquisition and about to complete a merger is not stopping DHI from seeking additional new partners. I believe that the possibility of acquiring WBB has been moving the shares up this week. The run up in the homebuilding sector and CON, DHI's merger partner has also helped. DHI hit a new 52 week high today with some nice vol. for a Fri.
ANTX has also had some interesting developments and perhaps Amigo Mike can fill this thread in on the news and expectations.
SRSL's acquisition plans were not well received by individual investors. We'll see how Wall Street views the stock in the next two weeks. Thank David for keeping us up to date.
NRL is in the Amigo portfolio because we believe that the stock offers
huge upside potential with little downside risk. Here's an excellent article from last week carried by Dow Jones:
Once-Hot Norrell May Soon See
Good Times Return, Analysts Say
By Kelly Greene
ÿ
02/18/98
The Wall Street Journal
Southeast Journal
Page S3
(Copyright (c) 1998, Dow Jones & Company, Inc.)
ÿ
The problems at Norrell might be only temporary.
The staffing-services firm, which helps companies in a pinch find everything from temporary secretaries to computer programmers, saw its once-highflying stock plunge a harrowing 36% to $16.56 in a single day in December. The tumble came after Norrell reported a loss, its first ever, for the fiscal fourth quarter ended Nov. 2. This was the end to an impressive three-year run in which the Atlanta company beat Wall Street earnings projections every quarter. And there was more bad news: Norrell warned that the first quarter looked gloomy, too.
The reason for the unexpected loss? Usually, one of Norrell's strengths is selling large chunks of services to blue-chip companies. But this time, the Teamsters strike at Atlanta-based United Parcel Service of America, Norrell's second-biggest customer, idled workers Norrell supplies to the parcel-delivery giant.
The fourth-quarter swoon also included a hefty write-off related to an overhaul of Norrell's computer-billing and payroll system, which the company conceded would soon be overwhelmed by its growth.
Now, however, a handful of bargain hunters are betting that Norrell soon will return to its former ways. They contend the company will start beating analysts' estimates again, as the effects of the UPS strike fade and the computer overhaul begins. And since Norrell's stock has rebounded only to about $22, still down 39% from its all-time high of nearly $36 in October, fans say it's a bargain.
"You've got the stock selling at its lowest valuation since it became a public company" in July 1994, says Brett Barner, portfolio manager at STI Capital Management in Orlando, Fla., who recently bought 450,000 Norrell shares and thinks the stock can hit $27 within 12 months.
Other fans say Norrell stock is a better bargain than ever. The shares are trading at 15 times estimated 1998 earnings of $1.45 a share, according to First Call. The average price/earnings ratio of Norrell's publicly traded peers is 20, according to Peter Vozzo, who follows staffing-services stocks for Interstate/Johnson Lane in Charlotte.
Mark Marcon, an analyst with Cleary Gull Reiland & McDevitt in Milwaukee, says Norrell is among the cheapest of the 20 staffing stocks he tracks, and its "enterprise value" -- a valuation tool that uses a multiple of cash flow -- of 8.1 times earnings before interest, taxes, depreciation and amortization (EBITDA) is on the "very low end of the market-value range."
"That's the price you would pay for a $5 million company in Milwaukee that's providing receptionists," Mr. Marcon says. Other staffing companies are being bought at between five and 20 times EBITDA.
Among the bargain hunters is Norrell's biggest shareholder. Guy Millner, the company's founder, former chairman and a staunch Republican who resigned in October to focus on his second campaign for governor of Georgia, bought 300,000 shares of Norrell stock on Dec. 12 for $17.32 apiece, bringing his stake to 9.5 million shares.
Analysts say the purchase was significant, because it was the first time Mr. Millner, still a Norrell director, bought its stock in the open market since the company's IPO. Bob Gabele, president of CDA/Investnet, a Fort Lauderdale, Fla., firm that analyzes insider trading, says Mr. Millner's purchase is a "positive sign." A spokesman for Mr. Millner says his purchase is "a clear sign that Guy continues to have confidence in the company's future."
"I like to see insiders buying," Mr. Barner adds.
A spokesman for Norrell, which is expected to release first-quarter earnings in the first week of March, declined to comment.
Started by Mr. Millner in 1965, Norrell went public almost four years ago, raising $52 million in an initial public offering of 3.7 million shares priced at $14 a share.
Norrell became successful by targeting blue-chip companies such as UPS and International Business Machines, its largest customer. The company performs a top-to-bottom diagnosis of a customer's work force, providing advice on how to tackle labor challenges.
At UPS, for instance, Norrell consolidated management of the delivery firm's personnel records at 30 locations around the country into one office. The office, opened by Norrell outside Atlanta, is staffed with Norrell employees who maintain the records with a centralized computer system.
"The basic mode of operation is for a staffing company to say, 'Give us a greater share of your temporary business,'" Mr. Marcon explains. "But Norrell prefers to take a look at the overall work force."
That formula was Norrell's launching pad for the stock's takeoff. Now, the company is one of the largest staffing firms in the country, with 468 offices and 19,000 customers for which it placed 236,000 workers in its fiscal 1997 year.
But the stock's rapid climb, and Norrell's reliance on big-name customers, set investors up for a fall. First, in October, the stock plummeted more than 20% to about $28 on speculation that Norrell was in danger of losing its IBM account. After Norrell denied that was happening, the stock started to recover, moving back up to $32.56 by Nov. 19.
But the recovery didn't last. On Nov. 20, Norrell said that it would take an $11 million charge for its fourth quarter to rebuild its computer systems to handle future payroll and billing needs. And on Dec. 11, Norrell reported a loss of $400,000 for the quarter. The company warned that continuing UPS fallout would also weaken earnings in its first quarter, which ended Jan. 30.
Even worse for the stock, say analysts, Norrell didn't handle its bad news well. At one point, Norrell didn't hold a conference call to explain what was going on. "They didn't give analysts a lot of guidance on this stuff," Mr. Vozzo says.
Flustered investors simply dumped the stock. "People had been whipsawed so much that they sold," says Mr. Marcon. "A lot of accounts have very little patience for this, and they clobbered the stock."
And, to be sure, some uncertainty remains "concerning the company's information system," says Mr. Vozzo, who still rates the stock as a "long-term buy." "There will be some costs, and I'm not sure what the costs will be," he says.
In addition to redoing its billing and payroll software, the company faces another potential technology blow -- reprogramming its machines to handle dates starting with the year 2000. "They don't seem to know the extent of that problem yet," Mr. Vozzo says.
So why give Norrell a second chance?
Some buyers think the company is working through its recent challenges. With another strike against UPS, this time by its pilots, successfully averted, Mr. Barner expects Norrell to start delivering more services soon. And he views the computer overhaul as a surmountable hurdle facing "about 25% of the companies out there."
"These problems are fixable," Mr. Barner adds, "and it's a good-quality company. |
