Bob Gabele's Insider Periscope
Right along with value investors, old-line manufacturers like Monaco Coach have paid the price for Wall Street's infatuation with technology stocks. Trading at a mere seven times earnings and close to its 52-week lows, the stock appears by most traditional measures to be a bargain. Maybe investors will take notice once 1Q earnings sink in. Monaco earned 67 cents per share, up 31% from the same period last year, while net income rose 30% to $12.9 million.
Given an aging and increasingly solvent US population, demographics should play right into Monaco's hands. In fact, in response to increasing demand, Monaco recently added 600,000 square feet of production capacity to its Coburg, OR plant.
And these aren't your every day, compulsive insider buyers. Among those acquiring stock, Chairman, CEO, & President Kay Toolson, for example, had been a heavy seller throughout '99, selling a total of 175,000 shares. Equally impressive, he last acquired 9,000 shares in December '98, then sold in mid-'99, realizing a 110% profit. VP Finance, CFO John Nepute also exercised options to acquire stock-8,000 shares. He last acquired and held 8,475 shares in October '99, but had been a seller from '96 through '98. Notably, both Toolson and Nepute are acquiring shares at higher prices than in the past.
Earlier this month, Thor Industries announced plans to acquire competitor Coachmen Ind. at a 40% premium. This merger could open the door for future industry consolidation, which would serve as a catalyst to jumpstart the entire RV group. As for valuation, it's little surprise that Toolson has stated his belief that Monaco Coach is undervalued, insisting that "eventually, value stocks are going to come back." We'd expect nothing less from Monaco's top dog-but at least he's backing his words with some hard cash.
On the subject of old economy vs. new economy, have you noticed how little this supposed dichotomy has protected old-line stocks from "tech"-style plunges? For example, when Edison International pre-announced disappointing earnings on March 6, the stock suffered a one-day decline of nearly 30%. That's quite a drubbing for a utility holding company. The issue appears to have found a bottom and is actually showing signs of a rebound; meanwhile EIX has reported quarterly earnings inline with the reduced estimates.
Wall Street appears skeptical of a near-term solution to the company's earnings woes but confident of a recovery in the longer-term. Insiders are typically longer term, value-oriented investors. For their part, executives at EIX appear anxious to buy on the stock's weakness. From March 6 through March 29, eleven insiders purchased 99,422 shares at $15.31 to $19.37 per share.
In his largest-ever acquisition, Chairman, CEO John Bryson purchased 36,000 shares on the open market. His only other sizeable acquisition occurred in '96, when he fortuitously purchased 12,200 shares after the issue suffered a 40% decline. Soon after, the stock bottomed and began a four-year rally. Similarly, Director Thomas Sutton's recent purchase of 20,000 shares was his first since he acquired 5,000 shares during '96's downturn. In March, Director Carl Huntsinger, a modest yet regular buyer throughout '94 and '95, made his first purchase in over four years with a 5,000-share acquisition.
Historically, investors have turned to utilities as a low risk alternative. It's not likely they are accustomed to seeing their investment plunge 40% in the course of a few days. On the one hand, the prospect of deregulation has added a new, exciting dimension to the once-staid industry, and there's little doubt that some investors are looking to the more progressive energy companies as growth stocks.
At the same time, it doesn't seem too much of a stretch that the plunder of EIX, instigated by disappointed growth investors, was exacerbated by a general disdain for "old economy" stocks. Certainly, the latest resurgence in Big Board stocks and recent gains in the utility index lend credence to the positive insider sentiment developing at EIX. Like Monaco Coach, Edison Intl. will be worth watching, especially should the investor flight from technology resume or a true flight to quality develop.