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Letter to the Editor

May 2000 Investment Update

As I have pointed out on numerous occasions in the past, there is no such thing as a free lunch. However, there is such a thing as free fall as it relates to the Stock Market, and that can be very expensive. Activity during early April presented a classic example, with the Dow Jones dropping several hundred points during a week. Inflation fears are blamed for the free fall. Will the Market recover, and if so, how long will it take?

My personal opinion is that stocks with a PE Ratio, at the beginning of April, of 15 or less, will recover in the next couple of months, while the high fliers in technology and Internet stocks will suffer for quite a while, with some of the Internet-based stocks never seeing their highs again, and some pending IPOs never launched.

Into the category of stocks slow to recover, in my opinion, will of course fall First Priority Group, which has tried mainly to reinvent itself as an Internet stock, with its focus on webpage development tied to claims services for insurers and fleets.

With no earnings, First Priority fits the classic description of the Internet stocks, except for the fact that it has never gotten to the highly inflated prices of some of the other Internet stocks.

Having just attended a CIC meeting, an SCRS conference, and Collision Concepts, all held in Kansas City, I was exposed to the buzz of new Internet entrants into our industry. Examples were CarStation.com, iSalvage.com, Parts.com, etc. All of these operators were long on promises, concepts, and vaporware, but showed little that was really useful or that would work consistently on a day-to-day basis now to help collision repairers improve their operations.

Russ Thrall’s INSIGHT feature story last month did a good job of summing up just what is going on Internet-wise in our industry, with the bottom line being: lots of hype but not much meat.

Changing the subject, stocks that I thought had a good chance for appreciating this year have so far been disappointing. These include CCC Information Services, Keystone Automotive, and even Safety-Kleen, which I had thought had already dropped so far that it had only one way to go - up. But surprise! Safety-Kleen’s per share price managed to drop even further, to a low of $1.31.

The only winners on a year-to-date basis so far are Sherwin-Williams, up over 50 percent, and Citigroup, up barely two percent.

My present belief is that we have a strong economy. Specifically, we have a strong Collision Repair Industry, with shops across the country showing consistent, albeit modest, increases in sales, with costs being held relatively constant.

-Charles Baker-

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