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Non-Tech : SWS - An undiscovered gem -- Ignore unavailable to you. Want to Upgrade?

To: William F. Wager, Jr. who wrote (296)	6/8/1999 1:21:00 PM
From: John Chapman	Respond to of 504

Yahoo post 6/8/99 Dick Bove at RJF has made some additional comments about SWS in light of the recent announcement about the ABSI acquisition. To those of you who haven't read it yet, please refer to post 8189. MY RJF broker has been keeping me updated. I find Bove's comments to be a valuable source of information since there is little written about SWS. I will paraphrase once again ( I dread this because I can't type; I hunt and peck!) The move to buy ABSI is a "brilliant stroke by a management team....totally in tune with.... the financial markets" The acquisition was two years in the making The primary reason to buy a stock is good management. This company demonstrates that is has a management team one should invest with. The acquisition should close in 90-120 days ASBI should earn $9 million dollars in net income in '99. The bank has a 3.4% return on assets, which is an extraordinarily high number for the industry. The bank has a 9.5% equity to asset ratio. The bank is well capitalized. When the ASBI deal is complete. SWS will be able to offer its customers a combined financial services account like Merrill's CMA account. I have an "ELITE" account with RJF. (these accounts offer checking, VISA, debit cards, investment and margin accounts, etc., all in one account. Additionally, ABSI originates $150 million a year in mortgages. These can be packaged and securitzed by SWS providing incremental profit. ASBI has 25,000 accounts. The acquisition will be slightly accretive. Investors would do well to follow the company's example and buy this stock. I get the feeling that Bove is impressed with management! Bove is sharp and I wouldn't doubt his instincts. My gut tells me SWS is ready for the second climb and will penetrate the old highs in the coming months. SWS is doing all of the right things, yet the market has yet to discover the real value behind SWS, especially when you compare them to companies like AMTD and EGRP (AMTD earns .42 per share on $230 million in revs, SWS will earn around $2.50 per share on the same amount of revs; what's wrong with this picture?). SWS is back! Yahho post 6/7/99 made quite a few comments on SWS this morning. My broker at RJF has given me the update, and it is quite extensive. I will paraphrase as best I can. Earnings estimates have been raised. They are as follows: June, 1999 (end of '99 fiscal year) 2.31 to 2.43. June,2000(fiscal 2000) 2.50 to 3.04. Trading results in the last quarter more than doubled and are maintaining a high pace in the current periond. Book value s/b about $4.50 higher in the June quarter due to its investments (this is tremendous growth, I might add) SWS is a bull market company. Trading gains (market making- they now make markets in 530 stocks) in the last quarter jumped eightfold from the prior year and indications are that SWS is maintaining those gains. As a result, earnings forecasts have been raised (see above) The recent sell-off has been ill advised. The selloff is due to Merrill's entry into OLB, fear of rate increases, and the rotation out of internet stocks which SWS is now a part of. SWS's income is not directly related to rates, it charges prices well below those proposed at Merrill's OLB, and, unlike most internet stocks, this company sells at a discounted multiple to the market in terms of earnings and book value. Bove then discusses the explosion of trading. From 1975 to 1995,volume per quarter went from 1 billion shares on the NYSE to 20 billion per quarter. From 1995 to present, volume increased from 20 billion per quarter to 49 billion per quarter. (these numbers are for the industry, not SWS) Bove then discusses SWS's position in the idustry and how all of the pieces seem to have fallen together at the right time, either through luck or genius. Future looks positive, assuming the market holds. The company's initiatives are just getting underway ( application of CSS, MDB expansion, sale of proprietary technology to others) By calendar year end, CSS should be in place and new customers will be attracted to replace ones that are leaving. Estimates of trading activity are low, as is activity at MDB. Estimates have been raised 10% in both categories. SWS has announced a convertible ($50 million in NITE shares due in 2004) within the next few weeks. Secular growth rate has been raised from 10% to 15% This stock deserves an internet valuation, since all of its business will be done on the Internet in 2000. Currently, it trades nowhere near an Internet multiple. We, therefore believe the issue is undervalued. Bove warns about high beta and fluctuations. I'm confused about the supposed new price target. I understodd it to be higher, but I don't see any mention of a new price target. I also understand that there was to be some sort of conference call with Raymond James this afternoon. Folks, a very glowing report. Apparently Bove will have more comments following the call. I expect to see some mention about SWS's purchase of ABSI. We're back. SWS is in the driver's seat! Posted