Andrew. Prince? Pauper?
...seventh in a series of Borefolio reviews
by Greg Markus (TMF Boring)
ANN ARBOR, Mich. (Sept. 16, 1998) -- The Boring Portfolio took another step on the road to recovery Wednesday, advancing 1.33% thanks largely to a $1/1/2 rise to $22 1/2 on heavy volume for FelCor Lodging Trust (NYSE: FCH) and a $1 9/16 gain in Atlas Air (NYSE: CGO).
Cisco Systems (Nasdaq: CSCO) rose $1/4 to $64 5/8 as the stock began trading at its three-for-two split-adjusted price. After two three-for-two splits within the past year, the Borefolio now holds 225 Cisco shares where once there were 100. We be reviewing Cisco in Friday's Boring recap.
Borders Group (NYSE: BGP) rounded out the winning team, gaining $7/8 to $27 7/8 in very active trading.
As part of our continuing review of Borefolio holdings, the spotlight shift tonight to Andrew Corp. (NYSE: ANDW). Andrew, as you may recall, is a global supplier of communications products and systems to commercial, industrial, governmental, and military customers. Its principal products are coaxial cables, special-purpose antennas, antennas and earth stations for satellite communication systems, radar and communication reconnaissance systems, and connectivity devices.
Andrew's stock eased $3/16 to $14 1/6 in Wednesday's trading. Alas, daily losses have been far too common for Andrew's stock since the Borefolio purchased its 200 shares back on Jan. 21 of this year at $25 15/16 each. That's a loss to date of 46%, for those keeping score -- and we are.
What in the world happened?
Well, it's less about what happened then about what didn't happen in the world -- or in Asia and, to a lesser degree, in Latin America, specifically. What didn't happen was a telecommunications infrastructure buildout nearly as rapidly as had been anticipated, owing in Asia to macroeconomic problems in much of that region (China notably excepted) and to various legal and political tangles that slowed the privatization of Telebras (NYSE: TBR), Brazil's huge telecommunications system. Slower than expected sales in connection with the buildout of the U.S. PCS infrastructure have also been a problem in 1998.
There's more. Pricing pressure on Andrew's cable business, from which it receives roughly half of its revenues, has intensified over the year. Some analysts have also questioned whether Andrew might perhaps be losing some market share, although I've seen no consensus in that regard.
Andrew probably exacerbated the problem for its stock by initially offering an upbeat view of the company's prospects for the year and later having to eat its words, twice. Whether or not the company should have gone out on a limb and offered such a view -- and whether industry analysts should have bought into it entirely -- is arguable, since, as do many its peers, Andrew fills the vast majority of its orders very quickly, typically within a matter of days, and so long-term visibility is limited.
In any event, we are where we are. Economic circumstances in Asia are likely to get worse before they get better. On the other hand, the telecommunications business in Latin America appears to be picking up, and the digital television and broadband Internet communications buildout in the U.S. offer good opportunities for Andrew.
Analysts' estimate (or, perhaps, guesstimate) that Andrew's earnings for the fiscal year ending this month will come in a penny or so below FY97's $1.18. As for FY99, they're looking for $1.31, according to First Call, or around an 11% rise.
At its current price, ANDW is trading at 12 times estimated FY98 earnings and less than 11 times the FY99 consensus forecast. It's difficult for me to see the stock falling more than a dollar or so from its current fire-sale price, although it's also difficult for me to see buyers move back into the stock anytime soon absent some notable and sustained signs of a recovery in the company's business. That said, value-oriented investors with long-term horizons may find it worthwhile to do some homework on Andrew.
Stock Change Bid ANDW - 3/16 14.06 CGO +1 9/16 24.25 BGP + 7/8 27.88 CSL - 1/8 38.94 CSCO + 1/4 64.63 FCH +1 1/2 22.50 PNR - 7/8 30.38 TBY - 1/8 6.44
Day Month Year History BORING +1.33% 14.11% -11.32% 11.58% S&P: +0.75% 8.37% 6.93% 66.93% NASDAQ: +0.70% 11.93% 6.86% 61.21% Rec'd # Security In At Now Change 6/26/96 225 Cisco Syst 23.96 64.63 169.77% 2/28/96 400 Borders Gr 11.26 27.88 147.64% 8/13/96 200 Carlisle C 26.32 38.94 47.91% 3/5/97 150 Atlas Air 23.06 24.25 5.17% 4/14/98 100 Pentair 43.74 30.38 -30.56% 5/20/98 400 TCBY Enter 10.05 6.44 -35.91% 11/6/97 200 FelCor Sui 37.59 22.50 -40.14% 1/21/98 200 Andrew Cor 26.09 14.06 -46.10% Rec'd # Security In At Value Change 6/26/96 225 Cisco Syst 5389.99 14540.63 $9150.64 2/28/96 400 Borders Gr 4502.49 11150.00 $6647.51 8/13/96 200 Carlisle C 5264.99 7787.50 $2522.51 3/5/97 150 Atlas Air 3458.74 3637.50 $178.76 4/14/98 100 Pentair 4374.25 3037.50 -$1336.75 5/20/98 400 TCBY Enter 4018.00 2575.00 -$1443.00 1/21/98 200 Andrew Cor 5218.00 2812.50 -$2405.50 11/6/97 200 FelCor Sui 7518.00 4500.00 -$3018.00 CASH $5750.59 TOTAL $55791.22