As the market continues to drag lower, investment pro Roger Lipton is steadfastly buying more shares--mostly of battered "value consumer stocks" that he thinks are poised to snap back. Lipton is no wild-eyed optimist: His hedge fund, RHL Associates, is up 43% in the past 12 months and ahead 22% this year. Surprisingly, he has been mostly long on stocks. Of late he has been buying more of OfficeMax (OMX ), the third-largest office products retailer, with some 1,000 superstores in 49 states. He's also high on Tweeter Home Entertainment (TWTR ), a Canton (Mass.)-based retailer of high-end audio and video consumer electronics with stores in New England, the mid-Atlantic, and the Southeast. OfficeMax has fallen to 6 a share from 8 in early May. It traded as low as 1.20 a year ago. Tweeter is down to 15 from 30 in January. OfficeMax has posted losses in the past two years. And Tweeter has cut the number of stores it plans to open next year.
Lipton sees OfficeMax turning profitable in 2002, earning 15 cents to 20 cents a share, and then 40 cents to 50 cents in 2003. Rivals Staples and Office Depot are twice as big, "but service at OfficeMax is better, with comparable products," he says. A new marketing system will enable it to compete better with bigger rivals--and grow rapidly, he adds.
Tweeter, which earned 84 cents on sales of $540 million in fiscal 2001 ended Sept. 30, should earn 90 cents on sales of $675 million in 2002 and $1.10 on $843 million in sales in 2003, says Lipton. He sees Tweeter at 25 in 12 months.
By Gene G. Marcial