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Harte-Hanks' Kind Of Direct Marketing May Thrive

Shares of Harte-Hanks (HHS), the direct-marketer, haven't lured many buyers this year. At 20, they're up just 7%, vs. 19% for the S&P 500-stock index. That'll change, says Emmanuel Roco of Independent Research Group. He sees it hitting 25 in 6 to 12 months -- as soon as the stronger economy gives revenues a boost. "People want to wait and see the business turn," he says. Harte's direct marketing, which includes junk mailing and programs to reward loyal customers, accounts for 63% of revenues. (Free-delivery local shopping papers make up the other 37%.) Direct marketing revenues declined 5% in 2002 and a further 1% in the first half of this year. Still, last quarter, for the first time since summer 2000, more Harte-Hanks customers increased than reduced direct-marketing spending. New do-not-call restrictions won't hurt much. CEO Richard Hochhauser says: "The effect is very small." In fact, the rule could boost junk mail. Rico expects companies will shift telemarketing funds to other direct marketing. The stock trades at 18 times analysts' earnings estimates of $1.09 a share in 2004. Charles Schwab gives the stock an A rating.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. By David Henry

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