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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (7512)	6/9/1999 3:10:00 PM
From: Neil H	Respond to of 78661

Elroy Looks good but no volume and to be honest I never have heard of it before. Quick dd showed it to be stock of the day on 6/2 Stock of the Day Jun 03, 1999 Bel Fuse: Growing Out of the Micro-Cap Shadows Bel Fuse (Nasdaq:BELFA - news) is a relatively obscure but fast-growing manufacturer of electronic components. It's plugged into several hot areas of technology including networking and DSL telecom equipment. Some investors have discovered Bel Fuse as a behind-the-scenes play on the exploding Internet/high-speed communications market. The upside to Bel Fuse is that this company has actual profits without all the hype of better known and highly-speculative Internet stocks. The downside is the usual array of small-cap risks: poor liquidity, lack of name recognition with individual investors, and limited interest from Wall Street...at least, so far. When we profiled Bel Fuse last August it was trading around $15. The company had just announced a deal to buy Lucent's (NYSE:LU - news) signal transformer business in August. The stock soared as high as $49.50 in March but has since settled back to the $32 area. Small caps can sometimes languish in a tight trading range for years, but Bel-Fuse shows they can also deliver a real pulse-quickening ride on occasion. Bel Fuse makes tiny magnetic components for computer networking equipment. It is the primary supplier to 3Com (Nasdaq:COMS - news) . The signal transformer business it bought from Lucent manufactures xDSL, ISDN, modem, broadband and power magnetic components for original equipment manufacturers and Lucent customers. The $30 million acquisition of this Lucent unit strengthens Bel Fuse's position in the market for telecom gear and broadens its product line. The company's strategy is to develop a full line of customer solutions, including new telecom products, to better compete during the consolidation of industry suppliers. With $102 million in sales over the last year, Bel is a niche player in the multi-billion dollar computer networking market, but the magnetic components segment is estimated to be a $400 million market worldwide. The explosive growth of networking (Internet access, corporate networks, etc) and Bel's close relationship with 3Com have it dialed into a strong industry. The 50-year old company also makes miniature and micro fuses, electrical converters and hybrid circuits. Bel's products are used in telecommunications, automotive and consumer electronics applications. Last year Bel positioned itself for significant growth opportunities in the telecom area by rolling out a line of DSL (digital subscriber lines) standardized products. DSL is a high-speed data transfer technology that phone and Internet communications companies are aggressively rolling out. America Online (NYSE:AOL - news) has partnered with several Baby Bells to introduce DSL access later this year. The stock of Bel Fuse has shown sensitivity to the market for Local Area Network (LAN) equipment, though its own networking component business has not shown any signs of slowing. Nonetheless, the telecom equipment products help diversify Bel's revenues and give it a second engine of growth. In the first quarter of 1999 Bel Fuse posted a 73% increase in earnings, to $0.95 per share, on a 58% gain in revenues. That brings trailing twelve-month earnings to $3.28 per share, giving BELFA a P/E of less than 10. By comparison, the S&P 500 has a P/E of 36. Earnings per share have grown on average 30% annually over the past five years. There is only one brokerage firm covering the stock right now, and that analyst projects earnings growth of 30% this year and 20% over the long-term. The company has no debt and insiders own 20%. With a market capitalization of $165 million, Bel Fuse is a tiny company in the eyes of institutional investors. But the way to gain attention on Wall Street is strong earnings growth and a rising stock price, so Bel Fuse seems to be doing the things a small-cap needs to do if it hopes to show up on the radar screen of the big investors. Neil