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Non-Tech
BBOX, SPF, GMSTF, Bill Wexler's Profits of DOOM 6/98
An SI Board Since June 1998
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Emcee:  Mark Johnson Type:  Unmoderated
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The original version can be found at
http://www.techstocks.com/~wsapi/investor/newsletter-69-2

Steve Kensinger of Wilke/Thompson Capital Management provides the
following stock idea on Black Box Corp. (BBOX 33 3/8). Below is the
write up.

Steve Kensinger of Wilke/Thompson Capital Management will admit
that he looks for companies with a "sustainable niche" and with mundane
products. His strategy has been successful because his clients accounts are up
14% so far this year. The last time I interviewed him was last December and
his favorite stock selection then was MSC Industrial Direct at $19 1/2.
Since then it hit a high of $28 1/2 and is now trading at $25 5/8 which is a
respectable 30% return for 6 months.

One company he is high on right now is Black Box Corp. They are mainly a
distribution business and sell cables, switches, routers, connectors, LAN
support and related computer connectivity products. Black Box provides
free customer support by phone and email to customers that purchase their
products. They also provide free support to people who do not purchase their
products. One benefit of this is, they may be able to provide additional
products or services that the person may need.

He sees earnings of $2.10 for fiscal year ending in April of 1999 and
$2.50 by April of 2000

Steve notes that the products Black Box sells are simple, common, are in
high demand and less susceptible to a fast product cycle or obsolescence.
"They have extremely strong cash flow, gross margins of 50%, expect
revenue to grow in the 15% to 20% range over the next several years and
have very little debt on their balance sheet, which will be gone after this year...
When that debt is paid off, they will have a lot of excess cash flow to fund
new investments," says Steve.

Steve adds that Black Box's stock has been "getting bounced around"
because there have been concerns about the decelerating growth rate and
selling prices of personal computers. Their stock is down from their 52 week
high of $46 because of those concerns. "Black Box does not sell personal
computers or products that will be quickly outdated," says Steve. He sees
earnings of $2.10 for fiscal year ending in April of 1999 and $2.50 by April of
2000. He thinks Black Box's stock should trade at 20 times forward
earnings with their shares hitting $50+ within the next 12 months.

------------------------------------------------------------

Eric Barden of First Austin Capital Management provides the following
stock idea on Standard Pacific Corp. (SPF 19 3/16). Below is the write up.

With low interest rates and with an economy running at full steam, it is no
wonder that Eric Barden of First Austin Capital Management (their
equity accounts are up 45% over the last 12 months) likes the shares of the
housing builder Standard Pacific Corp.. They primarily build middle to
upper class homes in California and Texas which are the "two strongest
regional economies in the nation."

Within the last year, Standard started making homes that were more
expensive. They were making homes that were in the middle to lower price
ranges. The higher priced homes have higher margins and the average selling
price of their homes has increased over 20% during the last year. "This has
doubled their operating margin to 7%," says Eric, "They have successfully
executed a shift to the higher end of the market".



One reason why Eric likes Standard is because they have "great" revenue
growth as well as earnings growth. He sees that trend to continue for
sometime to come because of shifting population trends into the two states
they work out of. Another reason why he likes them is because they trade at
discount to other home builders.

Eric notes that many high quality home builders have PE Ratios of over 20.
"If we get that kind of multiple expansion for Standard, then you will see their
stock appreciate from strong earnings growth." He thinks they could earn
$1.30 for fiscal 1998 and $1.60 for 1999 with their stock hitting $27 within 6
months.

------------------------------------------------------------

Timothy Lutts of The Cabot Market Letter
cabotm.com provides the following stock idea on
Gemstar (GMSTF 37 1/4). Below is their write up.

"In 1988, Henry Yuen recorded "snow" instead of a Red Sox game. We've
all been frustrated by VCRs, but we forget it and move on. Not Henry. With
his love for baseball and his passion for invention, he vowed then and there to
simplify VCR recording. That vow led to the VCR Plus+ Instant Taping
System and the creation of a new company, Gemstar.*

Is this a revolutionary idea? Not exactly. No one will claim that Gemstar's
products will change the world. But the television set is the most widely used
appliance in America. There are more TVs in American homes than
computers, telephones or refrigerators. And the VCRs that are attached to
these TVs typically have more technology than most of us can handle!
Gemstar's mission is to fix this, not by dumbing down VCRs, but by creating
systems that bridge the gap between consumers and technology.

No, this doesn't mean you can talk to your VCR yet. And you can't tell it to
tape the next Red Sox game from start to finish and make sure to get it all on
one tape and leave out all the commercials. But when you can do those things,
a few years down the road, it's a good bet that Gemstar, which already has
over 85 patents, issued and pending, will be the company that brings them to
you!

Today Gemstar's system is the international standard

Today Gemstar's main product is the VCR Plus+ Instant Taping System, first
introduced in 1990. How does it work? If you look in TV Guide or most
newspapers, you'll see a PlusCode listed alongside most television programs.
If you want to tape a particular program, all you do is enter its number, which
can be from one to eight digits long, into your VCR. That number, which has
been generated by a patented process developed by Gemstar, contains, in a
compressed and encrypted form, all the information needed to tape that
program, including the date, the starting time, the channel and the length of the
program.

Technologically, as we said, this is not a world-changer. But it is a
world-improver, in that it simplifies a rather complex process. . . . . and it
saves time. Maybe it's on a par with the touch-tone phone, which has made
the once-quite-adequate rotary dial phone nearly obsolete. But what's
important here is the fact that Gemstar's management persuaded
manufacturers, beginning in 1990, to pay to install this technology in their
VCRs. Not only that, it persuaded publishers of newspapers and other
sources of television listings to pay to print program codes in their
publications. Today Gemstar's system is the international standard, with its
PlusCode listed in over 1,500 newspapers and magazines in over 32
countries. To us, that's the real achievement! Gemstar has achieved an
ongoing revenue stream from these licensing fees that requires very little extra
work, and it's contributing to exceptional profit margins.

And there are two more products, younger but equally promising. The first is
called Index Plus+, a product that automatically captures the titles of the
shows you record and creates an on-screen directory of all programs
recorded on each tape. To play back a program, you just highlight it on the
screen, and push "play." The VCR automatically moves to the beginning of the
show and plays. Simple. Index Plus+ also enables automatic set-up of a new
VCR. Just tell it your zip code and cable information and it does the rest, even
setting the clock! The system is already incorporated in Panasonic, JVC,
Hitachi and Fisher VCRs. And it's supported by over 375 local television
stations, along with three national cable networks (WGN, The Family
Channel and A&E), the ABC Network, Fox Broadcasting, CBS, and United
Paramount Network.

The Big Softy is also paying Gemstar licensing fees

Gemstar has yet to come up with a program that resets your VCR clock
when the power goes off. But someday, who knows? Another product,
rolling out this year, is TV Guide Plus+, an on-screen interactive TV Guide.
But this one contains listings of only what's available on your TV. It's totally
free, paid for by the VCR manufacturer. You can even search for and sort
specific categories of listings, like sports or movies. And when you find what
you want, you simply highlight it and VCR Plus+ will tape it for you at the
appropriate time. Early licensees include Magnavox, JVC, Mitsubishi and
Thomson.

And while we're speaking of partners, let's not forget Microsoft. The Big
Softy is also paying Gemstar licensing fees, in connection with Microsoft's
efforts to merge the computing and television worlds. Put it all together and
you get a picture of a young company with valuable new technologies that's
assembled a formidable group of licensing relationships. As the months and
years go by, these technologies, still unused by most of us, are likely to
become such a part of our lives that we eventually become dependent on
them. But by then, this stock should be substantially higher.

The stock's price shot up from 13 to 42 in the five weeks after the company
came public in October 1995, reflecting intense investor enthusiasm. But the
company's prospects, still uncertain at that time, couldn't justify that price for
long, and the stock slowly came back to earth. Over two and a half years
later, however, the company is fundamentally stronger. The stock has just
broken out above those old highs. The probability is that it will keep on
climbing.

For the quarter ended March 31, revenues grew 37% to $42.7 million, while
earnings jumped 640% to $.37 per share. What's most unusual about this
company is the way a low-cost, mass market product that becomes truly
ubiquitous can lead to steady recurring income generating absolutely
stupefying profit margins. In the past four quarters these profit margins have
grown from 33.1% to 37.6%, 39.3% and 45.6%. Who knows how high they
can go? There is no debt. And note this: When you buy a piece of this
company, you can rest assured that management is working for you. Of the
48 million shares, management owns an impressive 67%, leaving just 16
million in the public float.

5-Year Record FY Mar
Sales Earnings
$ mill $ per share
1995 42 .32
1996 54 (.23)
1997 83 (.17)
1998 127 .99
1999 est. 190 1.20 "

------------------------------------------------------------

Bill Wexler is the creator and an active participant at the Bill Wexler's
Profits of DOOM thread here on SI. Bill provides the following
commentary about what goes on there and what his thread is all about. Below
is his write up.

"Profits of DOOM is a thread dedicated to short-selling stocks. The majority
of picks concentrate on businesses where I feel something a little bit shady is
going on...usually involving fraudulent stock promotion. I look for companies
with very weak balance sheets, negligible or no revenues (obviously earnings
are not an issue because they don't exist), and a stock price which seems to
be propelled by "meatless" press releases and the very, very high hopes of a
lot of small investors. On occasion I also take a Quixotic stab at an internet
high-flyer (ATHM), or a legitimate business which I feel has significant
downside risk (NSPK) - but my greatest successes by far have been with the
sleaze and wheeze operations.

At the top of my thread I state that I look for stocks that have "cult
followings". This turns out to be very important when uncovering scams. The
internet is a wonderful way to gauge this type of sentiment. I have discovered
that short-sellers are usually looked down upon on many SI threads, but the
fur REALLY begins to fly if a short -seller has a contrary opinion about a
dubious company. Take a look at some of the banter about CCSI and BTIM
on my thread - yeesh!! I take it as a good sign, for example, when internet
bulls begin talking about "short-squeezes" or claim knowledge of impending
"deals".

With my thread, I hope to provide a forum to expose and dissect these
shlocky companies. Things tend to get a little rude and tense since emotions
run very high....but it's also a lot of fun. When it comes to uncovering scam
stocks and phoney-baloney stories, it is really amazing how similar the
trading/price activity, mangement behavior, and reasoning of the fans are,
even across industry groups."
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