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MacAllaster's Picks | Neff's Picks
Q: What do they do, Archie?
MacAllaster: They make snowmobiles, personal watercraft and these ATVs,
all-terrain vehicles. Personal watercraft inventories sort of backed up last year.
Neff: Are these those jet-ski things that are so dangerous?
MacAllaster: They have had problems selling them, too! But their all-terrain vehicles
are No. 1 or No. 2 in the business, and that business is growing about 30% a year.
Polaris should report about $2.25 for '96, up just slightly from $2.19 the year before.
For '97, it should earn $2.45-$2.50, so at the present price, it is under 10 times earnings
- a very good value. A good balance sheet. It has been buying in its own shares. They
bought 450,000 shares in the first nine months. They have 27 or 28 million outstanding.
It pays a 60-cent dividend, about a 2 1/2% yield.
Another one I recommended last year was VeriFone. I mentioned it at 28 and it went to
52 within about four months. But it's back down to 30. In '95 they earned $1.32, the
estimate is $1.52 for last year and, I would say, for this year, $1.80-$1.85. They had a
problem in the last quarter with sales in Mexico. They sell all over the world. Business in
Europe has been very strong, in the U.S., up slightly. But it is down severely in Latin
America, especially Mexico.
Q: VeriFone's business is credit-card verification or something?
MacAllaster: Yes. They make systems that you click your card through to verify and
process transactions.
Q: But the reason it took off had something to do with the Internet?
MacAllaster: There is no question, they have kept right up on the Internet. They have
contracts with Bank of America, Hewlett-Packard. I would guess that by the second
half, a lot of the increase in VeriFone's earnings will come from its Internet activities. It
has what are called open-payment solutions based on MasterCard-Visa
secure-payment standards - and affiliations with Microsoft, Netscape and Oracle.
Nonetheless, the 'Net hasn't produced any income for them yet. But it is another
company buying in a lot of stock. It has 26-27 million shares out, is buying in a million.
A great balance sheet. The last one I saw, for the nine months, showed $100 million in
cash and practically zero debt. Basically, the momentum players got in, ran it too high.
When it didn't go up any further, they all started to sell and it took a ride all the way
back. But here you have a company growing 15%-20% in revenues and about 20% in
earnings. It should do that next year again, and it is worth more than 30. I mention it
again because I suspect that a lot of people who perhaps bought it on this article a year
ago, unlike me, subsequently sold it. I still own it - so I made the round trip. But many
people don't hang in there long these days, so perhaps they did very well in it. And they
might be able to do it again this year.
Rogers: Will you sell it this time?
MacAllaster: No.
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