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Letter to the Editor
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This article originally appeared in the September 2000 Issue of INSIGHT

September 2000 Investment Update

Well, most of the "dogs" we talked about last month are still sleeping, and a couple of new dogs have come along to sleep with them.

The start of a summer rally didn’t have much of an effect on most of our Collision Repair Industry-related stocks. Somebody needs to stick a sharp stick in these babies to wake them up.

DuPont stock crawled up to a high of just over $50 today for a better than ten percent on the month, but is still down close to 25 percent on a YTD basis.

ADP, considered more of a "fat cat" than a "dog," has shown life and is now up close to ten percent for the year. ADP has an enviable record of showing year after year of double-digit growth in sales, earnings and the value of its stock. Unfortunately, the same can’t be said for most of the other companies we cover.

In our Under the Microscope section this month we are covering Copart and Insurance Auto auctions, both of which show significant Year-to-Date gains in the value of their stock of 48 percent for Copart and 17 percent for IAA.

Some companies that at the beginning of the year I thought would do well have been disappointments. CCC certainly falls into this category, with its stock still under $10.

In the paint sector, DuPont, FinishMaster, Valspar, BASF, and PPG have all had disappointing stock performance, although sales and earnings have been strong. The only exception on the paint side is Sherwin-Williams. It got hammered last year and is now showing gains as it recovers from last year’s drop.

This month we have added Frontier Adjusters to our listings. Frontier was purchased by United Financial Adjusting of Cleveland, a spin-off of Progressive. UFAC had in fact been purchased by Netrex Holdings. Now, if you watch the pea under the walnut shell very closely, you will see that Frontier has filed with the SEC to change its name to NetrexConnects. Thus Netrex Holdings becomes a listed stock when the Frontier to Netrex name change is approved.

Somewhere along the line Frontier stock went from $1.20 to nearly $4. Eighty percent plus of the Frontier stock is owned by "insiders," the original investment group including Progressive. I have a hunch that Netrex will be using the stock as part of its strategy to acquire other companies relating to their core business of claims handling.

Is Frontier/Netrex a buy at this point? I don’t know and won’t have an opinion until we see this year’s 10K for Frontier/Netrex, which should provide a pretty good idea as to future value.

In an election year stocks have always rallied prior to the election. Will this year be any different? I doubt it, but from a personal standpoint I am pruning investments from both ends of my own modest holdings, getting rid of all the poorest performers, i.e. "dogs," and selling off some part of issues where I have been more fortunate and show a modest gain.

Prudence dictates, I believe, that 20 percent of total holdings should be in cash equivalents as the election nears. A case can be made that the market abhors surprises, and if the actual election doesn’t reflect today’s polls get ready for some low cost buying opportunities.

-Charles Baker-



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