December 25, 2000
MAINE STOCK TRENDS
Looking for a wild ride? I-Many's your stock
Copyright © 2000 Blethen Maine Newspapers Inc.
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Shareholders pay a price for the American Skiing - MeriStar merger (December 18, 2000)
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Who says you can't have a lot of fun for under ten dollars anymore? Nine dollars can still bring months of excitement into your life. Nine dollars was the price of admission for getting in on the I-Many (IMNY-9.88) initial public offering last July. Since then, shareholders have been treated to a "Hold on to your seats, folks" roller coaster ride that even Six Flags would envy.
The company provides Internet-based solutions and related professional services that allow its clients to negotiate and manage complex contract purchasing arrangements and to facilitate business-to-business e-commerce in health care and other industries.
Last week's loss of 27.5 percent for I-Many was the worst percentage loss among all local stocks. But, that's only part of the thrills. On its first day of trading, which was July 13, I-Many's stock ranged between $8 and $13.31. Just a few days after going public, the shares raced up to $16.00. Then, lickety split, back down, below the IPO price, to a new low of $7.75. Another new high followed at $22 in September. Next, came a low of $14.06 in October. Another new high to $27.25 occurred on the day following the election. The stock slid down to $10.31 by the end of November. It was back up to $16 in mid-December. And, then last week, the stock moved back down to $8 per share. Bring on the caramel corn.
So, if you missed the IPO, and always wanted to own a stock that pays its dividends in thrills and excitement, now you've got another chance to get on this one. What's more, if you bought earlier when the company was expected to lose $.31 per share next year, now you can buy in with estimates that call for that loss to narrow to just $.03 per share in 2001.
The second worst performing local stock last week was Intelligent Controls (ITC-1.13). The stock lost a quarter of its remaining value and also last week equaled its lowest price ever since becoming a publicly traded company.
INCON, as the company likes to refer to itself, develops, manufactures and sells electronic measurement systems for the petroleum and power utility industries and for general level measurement and predictive maintenance applications. Products include line-leak detectors and underground storage tank monitoring equipment.
The company's micro cap market value ($5.3 million) and its $1.13 share price pretty much keeps the stock off the radar screen of institutional investors. Compounding the problem is the difficulty had by the rest of the investing public trying to get a quote on the stock. The stock shows up under one of three trading symbols: ITC, ITCEC, or ITC.ec, depending upon the quote and research vendor. The "EC" that some services require, by the way, is for "emerging markets". That was a division of the American Stock Exchange that championed emerging micro caps way back in the 1990's. The AMEX experiment in emerging markets is over, but the trading symbol still has yet to find common ground.
Meanwhile, the stock now trades at about one-half of its annual sales (which admittedly have fallen 28 percent for the first nine months 2000 versus the similar mine months in 1999.) There is no long-term debt. At last week's closing price, the company trades at 69 percent of book value. More importantly, the book value includes about $1.10 in cash/cash equivalents per share. Another way of looking at this is that a potential purchaser could buy up the company for a little more than $5 million. Darned near 100 percent of the purchase price is covered just from the company's current cash alone. What's left after that is a manufacturer that has averaged somewhere around $14 million in sales and earned a million dollars in pretax profit for each of the past three years.
Speaking of values, Fairchild Semiconductor (FCS-$12.38) fell to a new low last week. Behind the move was a revised earnings estimate from Robertson Stephens. As a result of statements made by Fairchild earlier in the month, the San Francisco brokerage firm lowered its current year earnings estimates by $.03 per share. More importantly, the estimate for 2001 fell from $3.09 to $2.68. That puts the consensus at $2.93 — for now. What is a little worrisome is that Robertson Stephens, one of five brokerage firms with 2001 earnings estimates, was at the high end until its revision last week. The fear now is that others may follow. Nonetheless, even if it is the $2.68 that holds, the company is still trading at about four and a half times next year's earnings, 70 percent of sales, and not quite four times cash flow. Things don't get much better than that in bear markets.
The stock price of the American Skiing Company (SKI-1.38) continues to tumble harder than a hotdogger on a double diamond trail.
While shareholders await a date for special meeting needed to formally approve of the merger with MeriStar Resorts (MMH-2.44), American Skiing stock has lost half of what little remained of its value price. That brings the loss to 92 percent in three years.
Why such a huge loss in such a short time? Management, which has compensated itself with millions in salaries, huge bonuses, salary increases, and more than 5 million stock options since going public, blames the problems and its poor stock performance on the lack of snow the past two winters. That's a little hard for the average common shareholder to swallow. Vail Resorts (MTN-$23.94), which went public the same year as American Skiing, trades above its 1997 offering price. In fact, Vail stock now trades at its highest price in two years, while American Skiing stock hit an all time low of $1.09 last week — too low to even buy a cup of coffee at one of its own resorts these days.
There was some good news in local stocks last week. A couple of local bank stocks were tied for the top performing local stocks. Banknorth Group (BKNG-$19.50) and First Coastal Corporation (FCME-$9.75) were each up 8.33 percent last week. The only news out on Banknorth was hardly spectacular: brokerage firm, CIBC World Markets reiterated its "hold" on Banknorth Group. First Coastal didn't have a thing. First Coastal's board, however, has authorized the repurchase of up to 5 percent of its outstanding stock. With an already thin float, it doesn't take much to send the stock price up when there are more buyers than sellers.
For shareholders with gains or losses in their portfolios, this is the final week to recognize those transactions as year 2000 transactions. Year-end also creates some interesting year-end strategies for individual retirement accounts. If you are an investor who is forced to take minimum distributions from your IRA, this may be a good year to take a distribution of shares rather than cash — if you have some beaten down stocks in your portfolio that you think will rise again.
For investors who anticipate reporting less than $100,000 of adjusted gross income this year, consider converting your regular IRA to a Roth IRA. If some of the stocks in your IRA have fallen in value, and you are currently taking distributions, then this may be the time to distribute stock certificates rather than cash, while the value of those stocks is low. That is assuming you feel that they will head back up again. Once out of your IRA, the gains take place as long-term capital gains when you distribute them into your own name. If you qualify for a Roth conversion, then the gains take place tax free (as opposed to tax deferred). There's not much time for those who want to implement this strategy in 2000. But, if you qualify for a Roth rollover, this could be a great year to convert all or part of your conventional IRA into a permanently tax free Roth IRA.
Brad McCurtain is president of Maine Securities Corporation. Maine Securities Corporation is an investment firm specializing in Maine's securities. From time to time, the corporation, its employees, and its clients may buy, hold, and/or sell positions in companies mentioned herein. As a regulated securities broker/dealer, the company and its employees are required to abide by all securities regulations at all times when communicating with the public. Brad McCurtain may be reached at info@MaineSec.com. Web site: http://www.MaineSec.com