Audrey Jones is a real bottom-fisher: She scours the lowest 5% of stocks for hidden values with market capitalizations of $10 million to $350 million. "Sometimes a bit higher," says Jones, investment manager at Morgan Grenfell Capital Management, which runs a couple of micro-cap funds that have outscored the large and small-cap indexes lately. "We buy growth cheaply, and we also seek value plays," says Jones, "but shy away from Internet stocks."
Jones has found bargains--not in biotechs, pharmaceuticals, or technology, but in home furnishings: CompX International (CIX) and Krause's Furniture (KFI). "We're looking for unusual companies in fast-moving markets," says Jones. CompX, the largest maker of ergonomic computer accessories and the second-largest maker of precision ball-bearing slides for drawers, outpaces the office-furniture industry: The company is growing at a yearly rate of 14%, compared with the industry's 8.5%. Given its strong balance sheet, says Jones, CompX is poised to make acquisitions for faster growth. Jones expects earnings of $1.50 a share this year and $1.75 next, vs. 1997's $1.09. The stock, now at 25, should hit 40 in a year, she says.
Krause's makes custom upholstered furniture, marketed under the names Krause's and Castro Convertibles. The company has tried to improve margins by raising prices, cutting promotional discounts, and improving manufacturing efficiencies. Jones expects a big jump in earnings--from 7 cents cents a share in the year ending Jan. 31, 1999, to 42 cents cents in fiscal 2000, vs. a loss of 39 cents cents in 1998. Jones sees the stock, trading at 4, rising to 6 in a year.