PRAGATI - March 1993 issue - BY MIRIYALAS CONTENTS - INTRODUCTION - SUMMARY OF RECOMMENDATIONS - RECOMMENDATIONS FOR THE MONTH C-COR Electronics Cohu Inc Centigram Communications Corp Grossman's Inc HEI Inc - BASICS OF STOCKS: CHAPTER 4. WHERE DO I LOOK FOR STOCK INFORMATION? - GENERAL INFORMATION (This information is mainly meant for the safely skip it.) - DISCLAIMER INTRODUCTION Welcome to the March issue of Pragati. Thank you all for your encouragement and support. This is the twelfth issue of this monthly publication and it has been a lot of fun working, learning, and improving with all of you. We have refined existing strategies and incorporated many more new ones. Also, the format of Pragati has evolved and will continue to evolve based on the recommendations of enthusiastic readers such as yourselves. We do have plans of growing further. We want to provide ever improving, professional service and to that end we want to make Pragati a commercially available newsletter sometime in the near future. We will keep you updated on these plans. Till then Pragati continues to be a publication distributed free of cost. Many of you have been sharing your information about Pragati with your friends and we thank you for that. Please feel free to distribute Pragati and to put up Pragati on local bulletin boards. In our February issue, we recommended Callaway Golf, North Atlantic Industries, Plymouth Rubber, and Tandycrafts. Of these only Callaway Golf reached the recommended price, and that too only in the past week! This is great news because, as you all know, there was a massive market correction in the week that President Clinton announced his new tax strategy. Thanks to the correction, all these stocks fell along with thousands of others. As our buy recommendations were not reached, these losses were completely avoided! Callaway Golf rebounded really strongly and reached our recommended price. This increases our confidence in this stock. We believe that Callaway Golf is a good stock to buy and to hold on to for about an year or so. Of course, do not forget your stop-loss. Although we believe that it CAN do well in the next year, if it falls to the stop-loss we would sell immediately. Also, if the stock keeps rising, raise your stop-loss too, and let there always be a stop-loss trailing the upward moving stock. We are trying to provide a good mix of stocks to our subscribers. Some of our recommendations are higher priced, more stable companies. Such companies move slowly and are of lower risk as they give you more time to react to any price changes. Other recommendations are lower priced stocks or more volatile hi-tech stocks that tend to move much faster and are inherently riskier as they give you much lesser time to react. Such companies are for the more avid investors who are willing to closely monitor the stock prices. In this issue, the section on BASICS OF STOCKS covers information sources for stocks: Where do I look for stock information? SUMMARY OF RECOMMENDATIONS In the following table we briefly present the status of the past PRAGATI recommendations. The current PRAGATI recommendations are appended to the end of the table for completeness. We give the company name, symbol, exchange, month in which it was recommended, price at which the stock was recommended, highest price reached since the date of recommendation, percentage change in price at the high and the current price. The name for Quarex recommended in our January issue has been changed to Western Beef (BEEF) ------------------------------------------------------------------------------ Company Date Rec. Rec. Price Hi since % Chng at Hi Price ------------------------------------------------------------------------------ Coachmen 11/92 10 18.75 87.5 (COA/NYSE) Audiovox 11/92 5.13 9.0 75.4 (VOX/AMEX) SunwardTec 12/92 1.94 3.25 67.5 (SUNT/NASDAQ) Seagate 12/92 21.88 22.38 Sold out at stop-loss (SGAT/NASDAQ) Devon Group 1/93 12-7/8 19.0 47.51 (DEVN/NASDAQ) New Image** 1/93 19-1/8 22.25 16.3 (NIIS/NASDAQ) Western Beef 1/93 6-3/8 8.5 33.22 (BEEF/NASDAQ) Callaway Golf 2/93 49.38 50.0 1.2 (ELY/NYSE) North Atl. 2/93 17.75 did not reach recommended price* (NATL/NASDAQ) Plymouth Rubber A 2/93 7.38 did not reach recommended price* (PLRA/AMEX) Tandycrafts 2/93 55.38 did not reach recommended price* (TAC/NYSE) -------------- Stop Loss -------------- C-COR Electronics 3/93 18-5/8 15-7/8 Cohu Inc 3/93 20.5 18-5/8 Centigram Comm 3/93 19-5/8 16-7/8 Grossman's 3/93 3-7/8 3-5/8 HEI 3/93 9-7/8 7-5/8 ------------------------------------------------------------------------------ *We withdraw our recommendations on these stocks. North Atlantic Industries came out with disappointing results immediately after we recommended on Pragati. Plymouth Rubber and Tandycrafts have pulled back considerably since the recommendation showing lack of interest among investors for these stocks at this time. **We hope that all our subscribers took their profits during the recent sharp market downturn. But New Image has now rebounded nicely and we continue to believe that it is a very good company to invest in. Its past three quarters have been a string of successes showing 9, 20, and 35 cents per share earnings when compared with the previous year's negative earnings. It is a good buy at the current price levels (19.25) with a stop-loss of 16.88. Treat this as another recommendation on this stock. RECOMMENDATIONS FOR THE MONTH We have five new recommendations for this month: CCOR Electronics Cohu, Inc Centigram Communications Corp Grossman's Inc HEI Inc Name of the Company: CCOR Electronics, Inc. Symbol: CCBL Exchange: NASDAQ Can be followed in: IBD, WSJ, Barron's. Phone: (814) 238-2461 Address: 60 Decibel Rd., State College, PA 16801 52 wk Hi LO: 18.5, 8.75 Recent Price: 18 Recommended Price:18-5/8 Stop Loss: 15-7/8 Description: CCOR Electronics Inc. designs and manufactures an extensive line of electronic equipment for use in cable television and broadband data transmission systems, as well as in the broadcast and telephone industries. About 88% of CCOR's sales in fiscal 1992 were of products used in cable television distribution systems. Principal cable television products include trunk, bridging, distribution and line extender amplifiers, status monitor systems, digital and amplitude modulation fibe optic systems, main line passive devices, standby and ferroresonant power supplies and cable modems. Most of C-COR's remaining sales were derived from products used in broadband data transmission systems, primarily in the local area networks(LANs), and in the broadcast market. In fiscal 1992, about 31% of total company revenues were generated internationally, primarily in the canadian, Asian and European markets. The comapany's largest customers in fiscal 1992 were Pan Asian Systems and Cablesystems Inc. Reasons: After a dramatic industry downturn in C-COR's fiscal 1991 year, conditions improved in fiscal 1992. The company has recognized the need to expand its services beyond basic cable, and is looking for opportunities in telephony and elsewhere. The company has a low long term debt of 0.687 M. The company's earnings for the quarter ending Dec 25 1992 are: 3 mos to 3 mos to Dec 1992 Dec 1991 Sales 13.16M 11.065M Income 739,000 271,000 EPS 0.16 0.06 Avg. Shares 4.58M 4.54M Name of the Company: Cohu, Inc. Symbol: COH Exchange: AMEX Phone: (619) 277-6700 Address: 5755 Kearny Villa Rd., San Diego, CA 92123 - 85623. 52 wk Hi Lo: 20-3/8, 9-5/8 Recent Price: 19-1/8 Recommended Price: 20.5 Stop Loss: 18.75 Description: This company manufactures television cameras and equipment, semiconductor testing appratus, metal detectors and microwave products. 52% of the company's revenues are from electronic test and detection apparatus and 48% from Television cameras and equipment. The company's Electronics division designs and manufactures state-of-the-art closed-circuit television camers, camera control systems, and accessories for security/surveliance applications as well as for scientific and industrial applications such as image processing, microscopy, machine vision and process control. Reasons: The company's earnings rose strongly in fiscal year of 1992, as results benifited from increased shipments of semiconductor test/handling systems. The company has a long term debt of $1.5M and a tangible book value of 12.47. The company's stock price has hit an all time of 20-3/8 in the last two weeks. The company's earnings for the quarter ending December 31, 1992 are as follows: 3 mos to 3 mos to Dec 92 Dec 91 Revenues 15.5 M 12.5 M Net Income 1.198 M .648 M EPS .58 .31 Name of the Company: Centigram Communications Symbol: CGRM Exchange: NASDAQ Phone: (408)-944-0250 Address: 91 E. Tassman Dr., San Jose, CA 95134. 52 wk Hi Lo: 19.5 3.75 Recent Price: 19.25 Recommended Price: 19-5/8 Stop Loss: 16-7/8 Description: The company designs, makes and markets audio information systems that allow the touch-tone telephone to be used as a communications workstation. The system permits users to access and interact with a broad range of voice, text, data and fascimile applications, including voice messaging and interactive voice response. The company's systems enable the user to expand its capacity without requiring replacement of the original system. Reasons: The company's communication workstation is a very useful system to have in most offices today where travel is imperative in day to day business transactions. In such a situation with a simple phone call the user can be up to date with the messages in his/her office. Physical absence from his/her office will not be a serious hindrance. The company has a long term debt of $1.5M. Its price rebounded definitely after the recent correction and has started hitting new highs. The earnings for the quarter ending January 1 1993 are as follows: 3 mos to 3 mos to Jan 1993 Jan 1992 Revenue 13.04 M 9.74 M Income 1.001 M .031M EPS .20 .01 Avg Shares 5.05 4.73 Name of the Company: Grossman's Symbol: GROS Exchange: NASDAQ (NMS) Phone: (617)-848-0100 Address: 200 Union Street, Braintree, MA-02184. 52 wk Hi Lo: 5-1/2 3 Recent Price: 3-7/8 Recommended Price: 3-7/8 Stop Loss: 3-5/8 Description: Grossman's is a retailer of lumber, building materials, and other home improvement products. Grossman's has pioneered many merchandising presentations to the do-it-yourself consumer. The Company operates 139 stores, principally under the trade name "Grossman's", in the six New England states, New York, New Jersey, Pennsylvania and California. Additional stores were opened in 1992 and one more store is scheduled for opening in mid 1993. The Company emphasizes sales to its target customers: contractors, remodelers and serious do-it-yourself consumers. The company in the past two years has started it new contractors warehouse concept. This targets primarily contractors, remodelers and trade customers. These stores are designed and managed to provide the customers with an in-stock assortment of lumber, materials and supplies they need; efficient knowledgeable service; and prices that the company believes are unbeatable by other stores. With the profitability of these new concept stores which have high volume sales with low cost structures, the company is expanding stores with this concept. They are opening one more such store in Cincinnati, Ohio in the middle of 1993. Reasons: Lumber prices are going up and companies such as Grossman's are likely to reap the benefits of this situation. Moreover, we believe that Grossman's is well positioned to take advantage of this. Traditionally the first and last quarters of the fiscal year are the worst for Grossman's as it is in a seasonal industry. The results for quarter ending March 1993 are likely to be a loss as it has been for the past several years. The quarter ended December 1992 was a profit of 3 cents per shares as compared with a loss of 4 cents a share the previous year. But the 3 cents included profits from sale of property. But the second and third quarters of 1992 improved significantly showing profits of 19 cents and 18 cents per share when compared with 16 and 15 cents for the prior year. This is a cyclical stock. It us usually at its low during this part of the year. It should rise slowly in the next few months. It reaches it high price during the june to september period. Name of the Company: HEI Inc Symbol: HEII Exchange: NASDAQ small cap Phone: (612)-443-2500 Address: P.O. Box 5000 Victoria, Minnesota 55386 Recent Price: 8-7/8 Recommended Price:9.88 Stop Loss:7.63 Description: HEI is a Mennesota-based company specializing in the design and manufacture of ultraminiature thick film microelectronic devices, and high technology products incorporating those devices. HEI's special competence in this field is most applicable where ultraminiature rugged packaging and high reliability are required. HEI services circuit packaging requirements of medical, computer peripheral and industrial controls manufactures, including the hearing instrument industry. HEI's value-added standard products are based on, and benefit from, the company's microelectronics capabilities. Current HEI activities in this area include opto-electronic products for human/computer interaction and other applications. HEI is an established leader in the light pen market, supplying FastPoint pens and associated pen-mouse interfaces directly to OEMs and systems providers for screen painting and menu selection. FastPoint light pens are used in conjunction with dedicated software, applications under Windows, or new desktop uses stimulated by the emerging popularity of Pen Computing. Reasons: The company has some very high technology products. The company's strength in the Pen Computing industry is a big asset. HEI had record sales of $14M in fiscal year 1992. After 3 consecutive years of negative earnings HEI had an EPS of 0.57 in the fiscal year 1992. The company has $946,000 in cash and has a long term debt of only $181,000. The company's financial condition improved tremendously in the last year due to its improved productivity, quality, tight expenditure control, and discontinuance of activities which did not fit with the base business of designing and manufacturing microelectronic circuits and products. The company's earnings for the quarter ending November 28, 1992 are as follows: 3 mos to 3 mos to Nov 1992 Nov 1991 Revenue 4.169 M 2.770 M Income .849 M .176 M EPS .15 .06 ***************************************** CHAPTER 4. WHERE DO I LOOK FOR STOCK INFORMATION? ***************************************** What are the sources of information? During our initial period of investing, we found it particularly frustrating when we could not find the information we wanted. The kind of information we wanted varied depending upon the question for which we were trying to find an answer. Some of the questions were as follows: - From which books can I learn more about stocks? - Where do I get information about a particular stock? In particular, where to I get the address of a company, its past earnings, its latest earnings, details about the company's business and so on. - Where can I get the latest information about a company? - Where do I get information on what stocks to trade in? - What kind of information should I request from a company directly? Let us try to look at the answers to each of these questions next. A high-level answer to each of these questions is this: we can find most of the above information in a good public library. That is usually the least expensive way of getting information about stocks. Here we will discuss what in particular we should look for. From which books can I learn more about stocks? There are several books on stocks. Books that tell you what stocks are, how to pick stocks, when to sell stocks and so on. It is unlikely that we can learn all that we want to learn about stocks from a single book. Each of us has his or her own special interests, slants or needs. For example, if I am interested in regular news about a certain sport, I would not be happy with reading only the New York Times, I would search for a sports magazine covering the sport I am interested in. Simarly, interests of individual investors can vary widely. A novice investor might be interested in learning the basics of stocks, knowing what a stock his, how to buy stocks, basic strategies for picking stocks, and so on. A more experienced investor still in the early part of his career might be ready to take more risks and might want to invest in higher risk stocks with greater profit potential. Even in this category, there could be investors with interest in technology stocks, biotech stocks, medical stocks, and so on. Also, there could be investors with a lot of time to invest in stocks and others who are not willing to spend too much time but want a better return on their investment than the banks are willing to give. This list of special requirements can go on ad infinitum. The point that we are trying to make it this: each investors requirements are different. It is unlikely that a single book can teach all that an investor would like to know, given his interests. So it is a good idea to cover a wider ground. Here are some references. The order is unimportant. We make no claim to completeness of any sort: Peter Lynch with John Rothchild, One up on the Wall street: How to Use What You Already Know to Make Money in the Market, Simon and Schuster, NY, 1989. Bill Mathews, Winning Big with Bargain Stocks: How to Invest Successfully in New Issues, Warrants, and Stocks of Turnaround Companies under $10, Dearborn Financial Publishers, Chicago, IL 1991. Nicolas Darvas How I Made $2,000,000 in the Stock Market, Carol Publishing Group, 600 Madison Avenue, New York, NY 10022 1991 William O'Neil How to Make Money in Stocks McGraw-Hill, Inc. 1991 Here are some miscellaneous references about discount brokerages, terms of Wall street, DRIPs, and on-line information. Scott, David L. Investors Guide to Discount Brokers Praeger, NY, 1983 (Old, and possibly out of date). Standard and Poor's Guide to Financial Investment Terms, An Explanation of the Specialized Language used on Wall Street and in Corporatet Financial Reports. Standard and Poor's Corporation, 25 Broadway, New York, NY 10004 (212) 208-8000 At the end of the booklet there is a quick guide for locating financial/investment data in S&P servicess. It lists in a matrix format, phrases (such as earnings data, stock trading volume, etc) along the column and S&P information source along the row. As S&P is a major source of investment information, this is a very convenient and useful table to have. Directory of Companies Offering Dividend Reinvestment Plans Sumie Kinoshita: Editor, 9th Edition, Evergreen Enterprises, Laurel, MD, 1992 Dividend Reinvestment Plans: Guid Almanac (Annual Publication) Evergreen Enterprises, Laurel, MD, 1992 Charles B. Carlson Buying Stocks without a Broker, McGraw-Hill, NY, 1992 Individual Investors Guide to Computerized Investing American Association of Individual Investors, 1993 (Published annually) There are various sources for online information on companies, historical quotes, daily news, daily price etc. We will cover this in a later section. Where do I get information about a particular stock? We need to refine this question. What information about the stock do I need? Below we state a topic on which we want information and then list the sources that provide that information. Company's address and phone number, description of business, company's history Standard and Poor's Stock Reports or Standard and Poor's Corporation Reports are probably the best sources of this information. They provide information like the company's revenues and income for the past decade or so, annual high and low stock prices, balance sheet items such as cash flow, long term debt, operating income, and so on. They also provide information about book value, number of shares outstanding, give the address and phone number, and indicate insider and institutional ownership. Moody's manuals (Industrials, Unlisted OTC, etc) are also a good source of such information. Latest earnings To get the latest quarter earnings of a particular company, 1. call the company and ask them to fax you the news release for that quarter, 2. check the newspapers (Wall Street, Investors Business Daily, or New York Times) daily to track earnings of companies 3. check Standard and Poor's Daily Record or Moody's News Reports both of which give weekly updates on earnings, mergers, sales, acquisitions, IPOs, and so on. 52 week high and low trading prices for a stock For NYSE/NASDAQ NMS/AMEX stocks we can find this information in the Investor's Business Daily or the Wall Street Journal. For NASDAQ small caps (that is, those NASDAQ stocks that are not on the National Market System), we can get this information from Barron's. Weekly information about stock splits, dividends, name changes This information can be obtained in the last Page of Barrons, and some daily newspapers like Investors Business Daily. Weekly volume percentage leaders and price percentage gainers and losers on NASDAQ/NYSE/AMEX: Barrons. Company's legal proceedings. Some of the S&P reports talk about any outstanding legal proceedings of the company. However, the best and more recent source of information is the company itself. See below for requesting information from the company. Below we gather many sources of information useful in researching stocks. Many of these have been referred to in the preceding few paragraphs. Moody's OTC Unlisted Manual: Provides information (about a page of description) for most smallcap NASDAQ stocks. This is published yearly and therefore balance sheet information, etc might be obsolete. But we can get useful historical information on the stock and address and phone number of the shareholder relations of the company. Moody's OTC News Reports: This is updated on a weekly basis or so and contains regular updates on smallcap NASDAQ stocks on earnings information, sales, acquisitions, and so on. Moody's OTC Industrial Manual Moody's OTC Industrial News Reports These two contain information about industries on NASDAQ NMS and are analogous to the two references above for OTC Unlisted stocks. Moody's Industrial Manual Moody's Industrial News Reports Moody's Transportation Manual Moody's Transportation News Reports Moody's Public Utility Manual Moody's Public Utility News Reports These are publications that describe NYSE and AMEX stocks in that industry group. S&P OTC Profiles This is a quarterly publication that lists some NASDAQ stocks. It give about a paragraph of information about each company, summarizing succinctly historical earnings information, description of the company's business, latest quarterly earnings, and so on. S&P Stock Reports S&P Corporation Records These two give information about stocks on all three exchanges. S&P stock reports are very popular and present in a condensed form most information needed about a company. The drawback is that the updates are irregular and often we have only obsolete information. S&P Trendline S&P Chart Guide These publications are monthly and give charts for many stocks. S&P Daily Price Records Published quarterly, these records show the daily prices of OTC and NYSE stocks. These are useful for beginners who like technical analysis, although charts are much more useful. These are non-graphic, textual listings of daily prices. Nelson's Directory of Investment Research Vol I US Companies Vol II International Companies Nelson's Directory of Investment Managers Nelson's Guide to Neglected Stocks All Nelson's publications are published by: Nelson Publications, One Gateway Plaza, Port Chester, NY 10573 (914) 937-8400 What kind of Information should I request from a Company? Besides all these sources, detailed information about a particular company can be got from the Investment Relations division of the company by a written request or by calling them. Ask the company to send you the 10K and the 10Q reports which are the annual and quarterly reports filed with (SEC) Security Exchanges Comission. The 10K provides a description of the company's business, the annual balance sheet, a comparison of the current year's performance with the prior years performance, legal proceedings and other financial data. The 10Q gives the latest quarter earnings and balance sheet. It is a good idea to ask the company to send you its latest annual report and news releases. Also, to keep in regular touch with the company's progress request them to put your name on their mailing list. GENERAL INFORMATION The abbreviations IBD and WSJ stand for The Investor's Business Daily and The Wall Street Journal. We use ``K'' for thousands and ``M'' for millions. For each company that we recommend, we will give the following information: Name of the Company Symbol Exchange Can be followed in Phone Address Recent Price Recommended Price Stop Loss 52 wk Hi Lo Description of work Reasons We strongly urge a person interested in investing in a recommended stock to research the stock before investing in it. If any of the stocks that you own effects or decides to effect a reverse split, SELL immediately. Reverse splits should be avoided like PLAGUE. We use the notation 1-1/8 to denote 1.125 and so on. We use "-" to separate the whole dollar number from the fractional point. We usually give a stop buy for recommended price. That is you should buy the stock only if the price goes UP to that price. For AMEX and NYSE stocks you can place the stop buy order directly with your broker. For most NASDAQ stocks brokerages do not accept stop buy orders. So if we recommend a stop buy order for NASDAQ stocks, you should follow the stock price and buy it if it moves up to the recommended price. We do not recommend the stock if the stop buy price is not reached. The same holds for our suggested stop loss orders as well. You can place stop loss orders on all AMEX and NYSE stocks with the broker. For most NASDAQ stocks you will have to follow your own stop loss. If suggested stop loss is touched off but price move right back up, you can always buy back the shares. Stop loss is meant to protect against severe losses that can result if price falls drastically. Also when the stock price moves up you move the trailing stop loss up as well. This way you protect your profits, and you do not sell a rising stock (thus maximizing your profits). DISCLAIMER: There is no guarantee that stocks recommended here will do well. There is no guarantee that the information on which this article was based is correct. There is no guarantee that the information in this article is correct. Also, the companies where we work have nothing whatsoever to do with this newsletter. The readers should not assume that recommendations in future will be as profitable as previous recommendations mentioned here. The security portfolio of Miriyalas may include those mentioned in this issue and may from time to time increase or decrease interest in such positions. Any opinions expressed here are statements of our judgment as of the date of issue and are subject to change without notice. SUBSCRIPTION INFORMATION: PRAGATI is issued on a monthly basis. It usually comes out on a weekend. PRAGATI only gives BUY recommendations, but none other (i.e., it does not give sell or hold recommendations for example). If you want to receive PRAGATI every month by e-mail, please send your e-mail address to kanth@andersen.com with simply the name PRAGATI in the header. From: kanth@andersen.uucp (Kanth Miriyala)