Inside Wall Street
THIS GARDENER'S THUMB IS FINALLY TURNING GREEN
Investors who take their cues from corporate insiders should be eyeing General Host: Chairman and CEO Harris Ashton has been accumulating shares recently. His latest purchases, worth some $1.2 million, have lifted his stake in the company from 7% to over 8%. And, says a close associate of Ashton's, he isn't finished buying. The stock, which sold at around 5 in early January, now trades at 7 3/4.
In the '70s, Ashton built GH into a large meat-packing and food-service conglomerate. But by the mid-1980s, he had started whittling GH down by selling most of its assets, transforming it into a retailer of lawn-and-garden products, crafts, and Christmas merchandise. Its wholly owned Frank's Nursery & Crafts unit operates 270 stores in 18 states. GH had been in the red until 1990, when it earned 21~ a share.
Some big investors are convinced that GH has finally turned the corner, and they see impressive profits from here on out. One investor expects earnings of 60~ a share in the year ending Jan. 31, 1992. That's why Ashton is buying, says this pro.
As the largest player in the lawn-and-garden business, "General Host has the makings of a solid growth stock," says Boniface Zaino, a managing director at Trust Company of the West. He says GH has been beefing up its bottom line by cutting costs and improving operating efficiencies. Based on earnings potential, he sees the stock doubling in the next 12 to 18 months.
'DEFINITE EDGE.' Other big investment managers, including the Fidelity Group, are "rediscovering General Host as they begin to recognize that it's the dominant company in a fragmented $20 billion industry," says Allen Conkling, an analyst at Hibbard Brown. He notes that on a per-store basis, Frank's Nursery outsells such competitors in lawn-and-garden products as K mart and Wal-Mart Stores by a factor of 3 to 1. That's because GH has a "definite edge in quality, selection, and customer service," says Conkling.
A new wrinkle in GH's strategy is a proposed sale of its 80% stake in Calloway Nursery through an initial public offering of Calloway shares. Ashton says the $ 20 million expected from the IPO will be used to further reduce GH's $170 million debt. Last year, the company cut debt by $42 million and repurchased a million shares. Analysts say the Calloway deal will make GH even more attractive.
Ashton concedes that some major companies have made informal inquiries about buying GH. "I'm not encouraging it," he says, "but I'm always aware of our holders' best interests."GENE G. MARCIAL