Micro Stocks, Macro Gains?

William Blair's Cappy Price looks for giant values in small companies

prime example. The largest independent extruder of aluminum products in the U.S., Easco is selling at a bit less than 13 times 1998 earnings, yet could well see earnings increase 30% a year over the next three years. For one thing, new management is setting operations in order. For another, aluminum prices are stabilizing, which bodes well for business.

Little known, Denison International (Nasdaq: DENHY), a British company, has made quite a name for itself in the niche of specialized hydraulics. In layman’s terms, the company makes pumps, the kind the oil industry loves. Denison might be something of a mystery to Wall Street analysts, but Price and company are appreciative of the stock’s low P/E of 11 times 1998 earnings, and an expected growth rate of 16% or so annually for the next three years.

Price says Braun’s Fashion Corp. (Nasdaq: BFCI) is a textbook study in a turnaround with zing. A retailer based just outside Minneapolis, Braun’s runs 185 stores in 20 states in the Midwest and the Pacific Northwest. Price says the company emerged from Chapter 11 with a vengeance two years ago, shedding its underperforming stores. Price likes the fact that Braun’s boasts $1.33 a share in cash on its balance sheet. She sees the company, whose shares have a P/E of 10.4, raising earnings at a 14% annual clip for the next three years.

Maxxim Medical (Amex: MAM) is a niche medical player, a company that makes custom procedure trays for surgeons and special non-latex medical exam gloves. Price says a P/E of 18 is hard to beat and Maxxim is in for an average 16% earnings growth over the next three years.

Finally, Price likes Excel Realty Trust. A San Diego-based real estate investment trust (REIT), Excel runs shopping centers and single-tenant properties. Price likes the fact that two-thirds of the company’s lessees are locking into contracts spanning 10 years or more. It also doesn’t hurt that the stock’s P/E is a mere 12.3 and Excel boasts a yield of 6.1%, more than the 30-year Treasury bond.

MIGHTY MITES

Company Exchange: Symbol Current Price[*] P/E Est. 3-Year Growth
Easco Nasdaq: ESCO $14.63 30% 12.4
Denison Intl. Nasdaq: DENHY 17.56 16 11.2
Braun’s Fashion Corp. Nasdaq: BFCI 12.38 14 10.4
Maxxira Medical NYSE: MAM 26.00 16 18.2
Excel Really Trust NYSE: XEL 26.75 12** 9.6
* As of 4/24/98; **Measured in funds from operations
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