It seems as if small caps are learning from their large cap cousins: restructure to expand market share and boost earnings. These lessons have not been lost on the companies that comprise the B.E. Black Stock Index. The following is a roundup of the recent activities of several of these firms:
American Shared Hospital Services (AMEX: AMS): The medical devices firm recently sold its diagnostic imaging business for $ 14 million, and used a portion of the proceeds to repurchase 225,000 shares from GE Medical Systems. Analysts believe that growth will come from the growth of the concern’s Gamma Knife units, which use radiosurgical equipment to cut tumors and treat vascular malfunctions. Since we reported on the index last October, AMS’ stock has risen from $ 1.00 a share to $ 1.13 a share.
Ault Inc. (Nasdaq: AULT): In late December, the Minneapolis-based maker of power conversion products acquired the power supply assets of LZR Electronics for $ 3 million, and produced gains from its sale of modems. Earnings for the first two fiscal quarters of 1999 grew to $ 938,000 or 22 cents a share, from $ 596,000 or 14 cents a share. Since last October, Ault’s shares jumped more than 100%, from $ 4.06 to $ 7 a share.
Carson Inc. (NYSE: CIC): Since October, the Savannah, Georgia-based ethnic hair-care manufacturer has crowned a new CEO, Gregory J. Andrews, and developed a new attitude. Carson recently sold Cutex, the nail polish remover, for $ 30 million so that it could “focus on the core ethnic market domestically and internationally.” To further fuel expansion, Carson has borrowed $ 83 million in senior short-term loans. The share price dropped from $ 6 last October to $ 3 a share.
United American Healthcare (NYSE: UAH): The health management company is in the midst of a turnaround. It has shut down its HMOs in Florida, Louisiana and Pennsylvania and substantially trimmed staff. It seeks to boost earnings and its abysmal stock price through a strategic alliance with Blue Cross/Blue Shield to serve as the joint health provider for the proposed MGM Grand casino in Detroit. The share price, however, is still a sick patient in need of a respirator: it has dropped from $ 1.94 to $ 1.25.
Three faces of risk
Pierre Dunagan, managing partner of Dunagan, Robinson & Isbell Financial Services, a Chicago-based advisory firm, provided BE with asset allocation models for three distinct types of investors. The first one, between the ages of 21 and 34, is young enough to take an aggressive approach to investing. The second, age 35 to 50, wants to amass money during his or her peak earning years. And, the third, between the ages of 51 and 75, has developed a portfolio to provide the maximum amount of monthly income.