Ring This Bell For A Good Buy?

Value investing is again in vogue on Wall Street, and one company that's sending a buy signal to value investor Scott Black is Bell Industries, a major distributor of electronics components. What caught Black's eye was the stock's drop below its book value of 15 a share, a healthy balance sheet, and a relatively low debt-to-equity ratio.

Black thinks that Bell, now trading at 11 5/8 a share, "is underpriced considering that the company is well on its way to a sharp earnings turnaround." Black, president of Delphi Management in Boston, has accumulated some 4% of Bell's stock. He thinks it's worth at least 20 a share.

Bell Industries, which reported a sharp earnings decline in fiscal 1991, won't post any profit this year. But Black sees a turnaround in fiscal 1993, which starts July 1. He expects earnings of 95 cents a share vs. 1991's depressed 12 cents. And he sees a big earnings jump, to $1.80, in fiscal 1994.

Next fiscal year's orders are up by 25%, says Black. The bulk of earnings, some 68%, comes from electronics distribution and manufacturing. Bell also distributes motor vehicle parts, building products, and graphic arts supplies.

Black says the good news should continue in the subsequent years as Bell streamlines operations and slashes operating costs. He believes return on equity over the next three years should be in the 13%-to-14% range, with earnings rising to $2.50 by 1995.

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