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LOCAL INVESTMENTS
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Business New Haven
10/9/1995
By: BNH
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BNH asked a few area investment advisors to share their thoughts about locally based publicly traded stocks they find attractive, or merely interesting to watch. Their comments below do not reflect endorsements by the brokers or this publication.
Edward W. Lovejoy, Ladd Capital Management, New Haven.
“A neat little unsexy company based in Orange is Hubbell Inc. [NYSE]. They make electronic products from wires to lighting fixtures, industrial controls, insulators, surge-suppressers, some parts of data-transmission and telecommunications fittings. It's an interesting company that's been around for a long time.
“There are a lot of newer local companies that are intriguing, but they don't have the earnings to justify a solid long-term hold. But this is a solid company. On a trailing 12-month basis they've been able to grow their revenues more than 22 percent; their earning per-share are growing at over 16 percent. Their sales market is primarily domestic, but they're moving into the international markets, which should be really beneficial as that grows. Another thing we like is that insiders own more than ten percent of the outstanding stock. It's real important to have the insiders' profits tied to the company's profits. It's the kind of company you can buy, put in your portfolio and not even really look at it - it just keeps chugging along.”
Murray Gallant, Smith Barney, New Haven.
“Neurogen [NASDAQ] still strikes me as potentially the best in the biotech area. They have a schizophrenia and anxiety drug and they're working on an anti-obesity drug. They are very well funded, even though there is no current profit. They're still not making product, but they have enough cash to get them to the point when they begin marketing and manufacturing.
“They have strategic alliances with Schering Plough and Pfizer for research and marketing. They're pretty far along on clinical trials for the schizophrenia and anxiety [medications]. On anti-depressant and anxiety drugs, I think it has a lot of potential. The drug companies have invested a lot in them. I've talked to doctors in the area and they are impressed with the research. This is a speculative issue - it's not meant for widows and orphans.”
Christopher Getman, Merrill Lynch, New Haven.
“When we evaluate a company, we try to look at it from three directions. The first thing is the actual analysis of the company: We send these guys in green eyeshades out, they talk to management, kick the tires and make a recommendation pretty much in a vaccuum.
“The second thing is to create an asset-allocation model, trying to pick groups we think will perform well relative to the S&P 500. I believe that trying to prime the market by picking stocks that are going to move in the short term is an exercise in futility. Having the right asset allocation, being in the right groups, being in the right countries, is much more important than trying to decide whether to pick Ford instead of General Motors or General Motors instead of Ford.
“Finally, we look at the technical components of a stock - how its chart looks. It has nothing to do with what the company does; it's only how the stock has moved relative to the volume over a period of time. guy can look at the charten have to tell him the name - and he can tell you whether it's going to go up or down.
“My favorite local stock is Hubbell. Companies that have a good product that will not be impacted by higher interest rates are going to do well. The company is well-managed and their growth rate looks pretty good - 14 and a half times next year's earnings. And it has a yield of three percent.
“What Echlin Inc. [NYSE] has done very effectively is to grow their business through acquisitions. The stock has gone through the roof this year. It's a well-run company [valued at] ten times next year's earnings.
“If you're looking for yield, Northeast Utilities [NYSE] is a good place to look. For investors looking for income, they have a decent chart. They are broadly diversified - 42 percent nuclear and three percent hydro, so about half of their business comes from cheap fuel. Because the utility industry is becoming more and more deregulated, they're in a good position to deliver power more cheaply than some of their competition. And it's got a yield of over 7.5 percent.
“Pfizer Inc. [NYSE] is a drug company that's going to be with us for a long time. They've got a couple of drugs - Procardia, an anti-hypertension drug that's their largest-selling drug, and a new arthritis drug called Enable which, if it's a good one, that should help them.”
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