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CDI Sniffs an Upturn

With unemployment on the rise, this is a bad time to get into the job-placement business, right? So why is Big Board-listed CDI (CDI), which supplies techies to the blue chips, shooting up? Between Sept. 2 and Nov. 14, shares rose from 11 to 17.25--a 54% climb. Yet business has been terrible: In the third quarter, revenues were 19% below last year, and CDI posted a loss. And some analysts expect worse in the first half of 2002.

But value investor Mark Boyar, who has accumulated 147,500 shares, argues that staffing outfits are often the first to catch a whiff of a coming turnaround. The stock market usually presages an economic upturn six months ahead--and shares of CDI may be doing just that: forecasting a recovery in the next couple of quarters. Boyar insists that CDI will surprise investors with an earnings rebound in the first or second quarter. "This is one reason why CDI is moving up," says Boyar.

There is another factor behind the stock's buoyancy: a potential buyout. CDI Chairman Walter Garrison, 75, who owns 8.7% of the stock, is said to be inclined to sell the company once it gets back on its former growth path, says Boyar. Insiders control 40% of the equity, he adds, which would be worth twice its current price in a buyout. "We don't believe that keeping CDI in its current form is of critical importance" to Garrison, says Boyar. "More likely, he simply wants to see his personal fortune return to levels reached in 1998"--when CDI was trading somewhere in the 40s. New CEO Roger Ballou has been cutting costs to boost profitability. Garrison did not return calls for a comment. By Gene G. Marcial

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