All American In The Big Leagues?by
Hardly a giant among national distributors of electronic components, All American Semiconductor nevertheless has an impressive sales and earnings record that may deserve star billing. Net income doubled in 1993, and profits soared 110% in this year's first quarter. Analysts see a further 60% jump this year and a healthy 50% in 1995. So why is All American's stock performing so poorly, down from nearly 4 a share in late March to 21/2?
"There is no great mystery to it," says a hedge-fund manager in New York who snapped up shares when the stock started to drop in late April. "The big institutional investors have ignored All American for the biggies in the business, such as Arrow Electronics and Avnet." He notes that only two institutions own All American shares--but says big earnings gains ahead will draw their attention. This pro has loaded up on the stock, currently selling at only a 13 price-earnings ratio, because he thinks it's worth at least twice the current price.
"Earnings surprises will be on the upside," predicts Hank Powell of Southeast Research Partners in Boca Raton, Fla. He says that the company has invested heavily in capacity and that sales could jump from an estimated $105 million this year to between $300 million and $500 million in two to three years.
All American, notes Powell, is a rapidly growing distributor of components to the industrial market. It supplies a full range of semiconductors, such as microprocessors and memory chips, to original-equipment makers and contract manufacturers in various industries, including autos, aviation, medicine, and telecommunications.