PRAGATI - January 1993 - BY MIRIYALAS CONTENTS - INTRODUCTION - RECOMMENDATIONS FOR THE MONTH Devon Group MTC Electronic Technologies New Image Industries Quarex Industries Inc. - SUMMARY OF RECOMMENDATIONS - BASICS OF STOCKS: CHAPTER 2. HOW TO READ STOCK TABLES? - GENERAL INFORMATION (This information is mainly meant for the new reader. Regular readers of PRAGATI may safely skip it.) - DISCLAIMER INTRODUCTION Welcome to the January issue of Pragati. We wish all our subscribers a very happy, prosperous and profitable New Year 1993. In this issue our tutorial section is about stock tables and how to read stock tables. RECOMMENDATIONS FOR THE MONTH We have four new recommendations for this month: Devon Group MTC Electronic Technologies New Image Industries Quarex Industries Inc. Name of the Company: Devon Group Symbol: DEVN Exchange: NASDAQ Can be followed in: IBD, WSJ, Barron's. Phone: (203) 964-1444 Address: Six Stamford Forum, Stamford, Connecticut 06901-3227 52 wk Hi Lo: 4.19, 12.75 Recent Price: Closed 12.13 on Dec 31, 1992 Recommended Price: Stop buy 12-7/8 Stop Loss: 10-7/8 Description: Devon Group, Inc. is a diversified graphic arts company that provides the following services and products: advertising and editorial production services, computerized typesetting, composition, and color separation; printing, binding, and related services to a broad base of magazine publishers; and publishing/distribution of posters, art reproductions, original art, note cards, calendars, and related products. The Company's Black Dot Graphics, Inc. subsidiary is one of the nation's largest suppliers of pre-press services in design, photography, illustration, copywriting, electronic composition, color separation, and advertising typography. Black Dot provides high-quality services through proprietary typesetting software and the integration of traditionally separate pre-press services. The Company's Graftek Press, Inc. subsidiary provides high-quality color printing, binding, and related services primarily to the publishers of trade and special-interest magazines. Devon Publishing Group is one of the nation's largest publishers of posters, art reproductions, original art, calendars, note cards, and related products. Reasons: - The company has an excellent balance sheet with a low long-term debt (about 6.5 M). - For the quarter ended September 30, 1992, it came out with excellent earnings: 3 mos to 3 mos to Sept 92 Sept 91 Revenues 44.6 M 37.9 M Net Income 3.5 M 1.2 M EPS 0.49 0.17 Avg. Shares 7.1 M 7.1 M - Revenues have increased and overhead costs were relatively constant. Therefore, net income shot up. So if the revenues increase continues, this company should be raking up good profits in future too. Name of the Company: MTC Electronic Technologies. Symbol: MTCEF Exchange: NASDAQ NMS Phone: (604) 278-8788 Address: 2580 Viscount Way, Richmond, BC V6V 2G8 52 wk Hi Lo: 4.5, 30 Current Price: Closed at 21.75 on Dec 31, 1992 Recommended Price: stop buy at 22-3/8 Stop Loss: stop sell at 19-3/8 Description: MTC Electronic Technologies is a Canadian-based communications and distribution company serving the consumer electronics, facsimile and cellular telephone industries. The Company distributes a broad line of consumer electronic products in Canada, Mexico and the US and is involved in joint ventures with government divisions of the People's Republic of China to develop, implement and operate cellular telephone networks and to construct and operate a facsimile manufacturing facility in that nation. Reasons: - It has had a tremendous run-up recently, shooting up from around $6 to $30 before pulling back to $20. - The company came out with excellent earnings recently. Name of the Company: New Image Industries. Symbol: NIIS Exchange: NASDAQ NMS Phone: (818) 702-0285 Address: 21218 Vanowen St., Canoga Park, CA 91303. 52 wk Hi Lo: Recent Price: It closed on Monday January 4, 1993 at Recommended Price: Stop buy at 19-1/8 Stop Loss: Stop sell at 16-7/8 Description: New Image markets a family of computer imaging systems primarily to the dental marketplace. Its product called the AcuCam is an intraoral video camera that can be used by dentists to explore the hard-to-see areas of a patient's. The AcuCam includes a high-quality camera body and fiber-optic light rod with interchangeable 45 degree and 90 degree macro lenses built into a unit. The camera unit also includes a an image control processor and a halogen light source. Through fiscal year 1991, the company had sold 142 of the systems. In October 1989, New Image acquired the rights to certain software that has been used to develop the New Image Preview Imaging System. The system allows dentists to visually communicate to the patients the potential results of cosmetic dentistry procedures. The dentist uses the video camera to take a picture of the patient, whose image is input into the system and appears on a screen. The image can then be altered and printed to view a before and after picture of the potential outcome of a suggested procedure. The company also markets the DentalView combination IntraOral Camera and Imaging system which essentially combines the AcuCam and New Image Preview. During fiscal 1991, the company introduced the system 2000, a fully automated imaging system designed for the beauty industry that is part of a club New Image program. The club membership ranges from $19.95 to $74.95 and entitles its members to use the system at any participating salon. Reasons: - Earnings for the quarter ended September, 1992 were as follows: 3 mos to 3 mos to Sept 92 Sept 91 Revenues 5.4 M 2.1 M Net Income 796 K -812 K EPS .20 -.21 Avg. Shares 4 M 3.9 M - The company has a low long term debt of $194,000. - During fiscal 1991, the company undertook a major restructuring in an effort to reduce costs by discontinuing certain products and focusing on its dental products and club New Image. - It has very good fundamentals, having a good balance sheet and lying at the intersection of several hot areas (dental, imaging, and cosmetic areas) Name of the Company: Quarex Industries. Symbol: QRXI Exchange: NASDAQ NMS Phone: (718) 821-0011 Address: 47-05 Metropolitan Ave., Ridgewood, NY 11385 52 wk Hi Lo: 3-5/8, 7-3/8 Recent price: On friday it traded at unusually large volume and ended at 5-7/8. The high for the day was 6-1/4 Recommended price: Stop buy at 6-3/8 Stop Loss: Stop sell at 5-5/8 Description: Through its subsidiaries the company operates a wholesale meat and poultry business, a wholesale grocery business and warehouse-type retail food stores in the New York metropolitan area. It also has a trucking subsidiary that hauls goods for the company and outside customers. In February 1992, the company completed the acquisition of PSL Foods Inc., which owns six Western Beef supermarkets, in exchange for 1.4 million common shares. Pro forma earnings for the combined companies in 1991 were $3.8 million ($0.77 a share) on net sales of $270 million. Reasons: - Earnings for quarter ended Sept 1992 were as follows. 3 mos to 3 mos to 12 mos to 12 mos to Sept 92 Sept 91 Sept 92 Sept 91 Revenues 79.6 M 68 M 227 M 198 M Net Income 1.4 M 1.2 1.2 M 3.58 M 3.22 M EPS .29 .25 .72 .65 Avg. Shares 4.9 M 4.9 M 4.9 M 4.9 M Net income for quarter and year ending Sept 92 includes an extraordinary income of $487 K. - The meat products industry group did well in 1992 (this group tracked by the Investor's Business Daily went up 26% in the year). *********************************** BASICS OF STOCKS Copyright: Kanth and Shaku Miriyala *********************************** A warning to the experienced investor. Our goal in the BASICS OF STOCKS is to help newcomers to the field to quickly and clearly understand the business of stocks. It might be of little or no use to experienced investors like you. We welcome you to read and comment on it though. We have deliberately tried to avoid much of the jargon. However, if you find any factual errors please let us know! We will correct our mistakes in future issues and acknowledge you by name (unless, of course, you explicitly state that you want to remain anonymous). ***************************************** CHAPTER 2. HOW TO READ STOCK TABLES? ***************************************** The single most important activity of every investor in stocks each day is reading the stock tables to figure out how the stocks in his or her portfolio are doing. Therefore, it is a good idea to quickly understand how to read the stock tables. Almost every newspaper publishes stock tables every day. But the best coverage of stocks is in the Wall Street Journal, the Investor's Business Daily, and the Barron's. A typical line in a stock table looks as follows: 52 weeks Stock Sym Div Yield PE Vol Hi Lo Close Net Hi Lo (100s) Chg ^ 13 3-1/4 NantuckInd NAN .. .. 33 130 13-1/4 12-7/8 13 +3/8 52 weeks Hi Lo columns state the highest and lowest prices at which the stock traded in the past 52 weeks. For this company the lowest price at which it traded was 3-1/4 and the highest price was 13, in the past 52 weeks. The stock name is "NantuckInd". Due to space constraints the full name of the stock is not printed. In this case the full name of the company is "Nantucket Industries Incorporated". Sym stands for the symbol for the stock. The symbol for this stock is NAN. Usually NYSE and AMEX stocks have symbols with one, two, or three characters in them (For example, C stands for Chrysler Corp, MH stands for MHI group, and COA stands for Coachmen Industries). The NASDAQ stocks have four or more characters in their symbols (For example, NBTY for Nature's Bounty, and MGRY for Milgray Electronics). Div stands for Dividend rates (usually annual dividend rate). For NAN this column is blank indicating the company does not pay any dividends. Yield is the dividend paid expressed as a percentage of the price of the stock. PE stands for the price earnings ratio. The PE ratio is determined by dividing the price of a share of the stock by the earnings per share for the four recent quarters. For NAN the PE ratio is 33. That is, its earnings per share for the past four quarters was .39 cents. So $13/.39 = 33 is the PE ratio. Vol stands for the volume of shares traded that day. For NAN 13000 shares were traded on that day (volume is given in 100s, so 130 means 130 x 100 = 13000 shares were traded). Hi stands for the highest price at which the stock traded on that day and Lo stands for the lowest price at which the stock traded on that day. The lowest price at which NAN traded was 12-7/8 and the highest price at was 13-1/4. Close stands for the price at which the last trade was carried out. For NAN the last trade was at 13. Net Chg stands for Net Change which is the amount by which the closing price for today changed from the closing price for the stock on the previous trading day. For NAN the previous day's closing price was 12-5/8. For the day listed above, NAN closed at 13. So the net change is 13 - 12-5/8 = 3/8. The leading symbol ^ for the line is used by the Wall Street Journal to mark the companies that hit a new 52 week high. Nantucket has hit a new 52 week high, i.e., it traded at a price higher than it had traded in the past 52 weeks. Please note that the Hi and Lo for the day do not necessarily mean that you could have bought the stock at the low or sold the stock at the high. Most stocks have a spread, especially the NASDAQ stocks. For NASDAQ stocks there are two prices the bid price and the asked price. The bid price is the price you will get if you sell the stock and the asked price is the price at which you can buy the stock. The spread is the amount of money the market maker or the broker trading the stock makes! For example, MGRY (Milgray Electronics, a NASDAQ small cap stock) recently had a 3 dollar spread! Its bid price was 33 and asked price was 36. The Hi Lo for this stock was 33 and 36 on such a day; this only meant that someone had bought the stock at 36 and someone had sold the stock at 33 on that day. Thus one could not have bought it at 33 and sold it at 36. Investor's Business Daily and Barron's give a host of other information such as Relative Strength (compared with other stocks how well are the earnings for this stock growing), Acc./Dist (whether the stock is being accumulated or distributed), Earnings, etc. Barron's shows earnings and compares them with the prior year earnings (only earnings per share figures are shown). Barron's is a weekly publication and it marks with an arrow all the companies that came out with their earnings reports in the past week. For NASDAQ small caps stocks, neither the Wall Street nor the Investor's Business Daily give the 52 week high and low trading prices. These appear in the Barron's. In addition, all three of them (WSJ, IBD, and Barron's) list on a daily basis the day's biggest gainers on NYSE, AMEX, and NASDAQ as well as the largest volume and largest volume percentage increase stocks. 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. ------------------------------------------------------------------------------ Company Date Rec. Rec. Price Hi since % Chng at Hi Curr. Price ------------------------------------------------------------------------------ Coachmen 11/92 10 17.63 76.3 17.25 (COA/NYSE) Audiovox 11/92 5.13 8.75 70 7.25 (VOX/AMEX) SunwardTec 12/92 1.94 3.25 67.5 2.63 (SUNT/NASDAQ) Seagate 12/92 21.88 22.38 Sold out at stop-loss (SGAT/NASDAQ) ------------------ Stop-loss ------------------ Devon Group 1/93 12-7/8 10-7/8 (DEVN/NASDAQ) MTC Elect. 1/93 22-3/8 19-3/8 (MTCEF/NASDAQ) New Image 1/93 19-1/8 16-7/8 (NIIS/NASDAQ) Quarex 1/93 6-3/8 5-5/8 (QRXI/NASDAQ) ------------------------------------------------------------------------------ Dolco Packaging (DPKG/NASDAQ) and Micropolis (MLIS/NASDAQ) recommended in the December issue never reached the recommended price of 12-1/8 as it came out with disappointing quarterly results. We withdraw our recommendation on that stock. Seagate Technology got sold out at our recommended stop-sell of $19.63. So that recommendation is closed with a 10% loss. ***************************************** CHAPTER 2. READING THE STOCK TABLES. ***************************************** The single most important activity of every investor in stocks each day is reading the stock tables to figure out how the stocks in his or her portfolio are doing. Therefore, it is a good idea to quickly understand how to read the stock tables. Almost every newspaper publishes stock tables every day. But the best coverage of stocks is in the Wall Street Journal, the Investor's Business Daily, and the Barron's. A typical line in a stock table looks as follows: 52 weeks Stock Sym Div Yield PE Vol Hi Lo Close Net Hi Lo (100s) Chg ^ 13 3-1/4 NantuckInd NAN .. .. 33 130 13-1/4 12-7/8 13 +3/8 52 weeks Hi Lo columns state the highest and lowest prices at which the stock traded in the past 52 weeks. For this company the lowest price at which it traded was 3-1/4 and the highest price was 13, in the past 52 weeks. The stock name is "NantuckInd". Due to space constraints the full name of the stock is not printed. In this case the full name of the company is "Nantucket Industries Incorporated". Sym stands for the symbol for the stock. The symbol for this stock is NAN. Usually NYSE and AMEX stocks have symbols with one, two, or three characters in them (For example, C stands for Chrysler Corp, MH stands for MHI group, and COA stands for Coachmen Industries). The NASDAQ stocks have four or more characters in their symbols (For example, NBTY for Nature's Bounty, and MGRY for Milgray Electronics). Div stands for Dividend rates (usually annual dividend rate). For NAN this column is blank indicating the company does not pay any dividends. Yield is the dividend paid expressed as a percentage of the price of the stock. PE stands for the price earnings ratio. The PE ratio is determined by dividing the price of a share of the stock by the earnings per share for the four recent quarters. For NAN the PE ratio is 33. That is, its earnings per share for the past four quarters was .39 cents. So $13/.39 = 33 is the PE ratio. Vol stands for the volume of shares traded that day. For NAN 13000 shares were traded on that day (volume is given in 100s, so 130 means 130 x 100 = 13000 shares were traded). Hi stands for the highest price at which the stock traded on that day and Lo stands for the lowest price at which the stock traded on that day. The lowest price at which NAN traded was 12-7/8 and the highest price at was 13-1/4. Close stands for the price at which the last trade was carried out. For NAN the last trade was at 13. Net Chg stands for Net Change which is the amount by which the closing price for today changed from the closing price for the stock on the previous trading day. For NAN the previous day's closing price was 12-5/8. For the day listed above, NAN closed at 13. So the net change is 13 - 12-5/8 = 3/8. The leading symbol ^ for the line is used by the Wall Street Journal to mark the companies that hit a new 52 week high. Nantucket has hit a new 52 week high, i.e., it traded at a price higher than it had traded in the past 52 weeks. Please note that the Hi and Lo for the day do not necessarily mean that you could have bought the stock at the low or sold the stock at the high. Most stocks have a spread, especially the NASDAQ stocks. For NASDAQ stocks there are two prices the bid price and the asked price. The bid price is the price you will get if you sell the stock and the asked price is the price at which you can buy the stock. The spread is the amount of money the market maker or the broker trading the stock makes! For example, MGRY (Milgray Electronics, a NASDAQ small cap stock) recently had a 3 dollar spread! Its bid price was 33 and asked price was 36. The Hi Lo for this stock was 33 and 36 on such a day; this only meant that someone had bought the stock at 36 and someone had sold the stock at 33 on that day. Thus one could not have bought it at 33 and sold it at 36. Investor's Business Daily and Barron's give a host of other information such as Relative Strength (compared with other stocks how well are the earnings for this stock growing), Acc./Dist (whether the stock is being accumulated or distributed), Earnings, etc. Barron's shows earnings and compares them with the prior year earnings (only earnings per share figures are shown). Barron's is a weekly publication and it marks with an arrow all the companies that came out with their earnings reports in the past week. For NASDAQ small caps stocks, neither the Wall Street nor the Investor's Business Daily give the 52 week high and low trading prices. These appear in the Barron's. In addition, all three of them (WSJ, IBD, and Barron's) list on a daily basis the day's biggest gainers on NYSE, AMEX, and NASDAQ as well as the largest volume and largest volume percentage increase stocks. 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 and the INITIAL stop-loss (or stop-sell) 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)