Don't be surprised if you've had a tough time booking a hotel, even as room rates are leaping. Hoteliers are scrambling to put up new facilities because of the jump in demand. So says investment pro Jerry Levine, who has been scouting for stocks that seize on this trend. He thinks Shelby Williams Industries (SY) is one solid bet. It's now trading at 10, up from 7 in February. Shelby is a leading maker of furniture for the lodging, restaurant, college, and health-care markets.
Levine, who heads the Emerging Growth Group at Josephthal Lyon & Ross, says that, apart from Shelby's improving business, there is another factor a few pros are focusing on: a buyout.
A portfolio manager at one New York investment firm argues that a major furniture maker is thinking of bidding for Shelby because of its specialty furniture products. He thinks this outfit and Shelby have held informal talks. In a buyout, Shelby is worth 17 to 18 a share, he says. Manny Steinfeld, 71, Shelby's chairman, declined to say whether he had been approached. But the money manager says: "If an offer comes in at, say, 17 to 18 a share, [Steinfeld] would go for it."
Levine notes that, in the quarter ending June 30, backlog orders jumped to $34 million, up from last year's $28 million: Shelby recently snagged a contract for seating at Atlanta's new buildings for the Olympic Games. He figures Shelby will make 72 cents to 75 cents a share this year and 87 cents to 90 cents next year, up from last year's 47 cents.