Life has its little surprises, but there are few to match the feeling of waking up one morning to find that 5.3 percent of your company's stock has been bought by a stranger. That's what happened last week to the folks at Evaluation Research Corp., a high-tech company in Northern Virginia.
"We were surprised," said ERC President Jack Aalseth.
The "stranger" was Alan S. Parsow, a 34-year-old investor from Omaha, who was working in his father's clothing store in 1972 when he started a limited partnership investment fund with $27,500. Parsow is now a full-time money manager, and his fund has grown to $23.25 million.
Shortly after Parsow announced he had purchased a big chunk of Evaluation Research -- a company that provides engineering, computer and management services to government and private industry -- he called Aalseth to ask for a seat on the board of directors. Aalseth told Parsow that he would study his request, and the firm sent Parsow a letter asking him to give them more information about himself.
Choosing his words carefully, ERC's lawyer, Bill Sargeant, said the company wasn't rejecting the possibility of seating Parsow but would like to know more about him. "Our information is by no means complete," said Sargeant.
Indeed. When you buy a 5 percent piece of a company, you don't have to send the company your resume. But you do have to tell the Securities and Exchange Commission what you are doing. The notice is called a 13D. In his filing, Parsow told the SEC that Parsow Partnership Ltd. of Elkhorn, Neb., a suburb of Omaha, purchased 157,800 shares of Evaluation Research between Aug. 17, 1983, and Nov. 23, 1984, at a cost of $974,000. In the last 60 days, Parsow said, he bought 52,000 shares at prices ranging from $4.50 to $5.35 a share. That put him over the 5 percent level, requiring the notice to the SEC.
Aalseth said his company knew Parsow was buying stock because his name showed up on stock transfer sheets. Aalseth said he even had a brief phone conversation with Parsow but did not find out much. ERC did not know the extent of Parsow's purchases, Aalseth said, because some of the stock had been purchased in "street names" -- securities held in the name of a broker.
Parsow also told the SEC that he was buying for investment purposes only and "has no present intention of affecting any change in the control of Evaluation Research." Aalseth took that with a bit of caution. "There's no panic," he said. But Aalseth suggested that his company, without getting defensive, would be wary of Parsow. "We would want to watch pretty closely. We have to know where he is going."
Parsow, who attended the University of Nebraska, graduated with a degree in classics and minored in art history and accounting. He was working in his family's clothing store when he decided to start his investment fund, which has 35 limited partners. It was a hobby at first. But when the fund reached $5 million, Parsow decided to devote all of his time to his investment work. "I do all the research myself," he said.
Parsow says he drew inspiration about investing from a family friend who was also a customer at Parsow's Fashions for Men. The friend was financier Warren E. Buffett of Omaha, who is widely admired for his investment successes. Aalseth said Parsow told him of his admiration for Buffett. Buffett, in Omaha, said he knew Parsow and liked him, but didn't know much about his specific investments.
Legg Mason has included Planning Research Corp. of McLean on its 1985 "Investor's Dozen Portfolio." The Baltimore brokerage firm chose 12 stocks that it recommended for purchase and above-average appreciation during the coming year. The others were: American Carriers, BEST Products, John Blair, Centran Corp., Champion International, Coachmen Industries, Easco, Greyhound, National City Corp., Omicare and J. P. Stevens. The 1984 Legg Mason portfolio, which included Maryland National Bank, was up 29.88 percent, compared with 3.92 percent for the Standard & Poor's 500. The Legg Mason selections have outperformed the S&P 500 since 1979. Their best year was 1982, when the Legg Mason choices rose 56.83 percent.
The stock of Planning Research Corp. of McLean also has been recommended for "aggressive growth-oriented accounts" by Scott & Stringfellow of Richmond. Michael L. Mead, Scott's director of research, says that the current stock price (about $11.50) "reflects low expectations, providing a degree of downside protection and the potential for significant appreciation. . . . " The stock's 1983-84 trading range on the Big Board was between 8 5/8 and 21 3/4. PRC, which provides engineering and information services to an international clientele, last year won a $289 million, 18-year contract to develop an automated record-keeping system for the U.S. Patent Office. Earnings in 1984 rose to $1.62 from $1.30 a share. Estimated earnings for 1985 are $1.30 to $1.35, and for 1986, $2. On the risk side, Mead says, management has demonstrated strong cost controls but has not generated significant revenue growth for three years.
The Marriott Corp., whose hotels, restaurants and contract food services are expected to earn $3.4 billion in revenue this year, continues to gain recognition as one of Washington's blue chip companies. The latest accolade comes from Dun's Business Month, which named Marriott one of "The Five Best-Managed Companies." The magazine praised Marriott's "savvy financial management," its hotel building program and its record of earnings -- which have grown at a compounded annual rate of 24 percent during the past five years and are expected to rise another 24 percent to $5.15 a share this year. Other signs of recognition: The Wall Street investment firm of C. J. Lawrence included Marriott in its "New Nifty Fifty Index," a list of 50 established companies that have above-average growth (Barron's, Nov. 26). Merrill Lynch Capital Markets recently included Marriott in its list of 58 attractive large capitalization stocks.
Sallie Mae (The Student Loan Marketing Association) dropped off in price by 17 percent from $30.50 to $25.37 during the last two weeks because investors were worried that federal budget-cutting might hurt appropriations for the Guaranteed Student Loan Program, in which Sallie Mae is the largest holder of loans. So says John E. Keefe, a research analyst who follows the stock for Drexel Burnham Lambert. Most of the selling came from institutions, which are the largest owners of Sallie Mae stock. But the selloff has been on relatively light volume.
Scope Inc. of Reston is buying 243,080 shares of its stock from the investment banking firm of Rooney, Pace Inc. of New York at a price of $5.50 a share. That's about 20 percent of Scope's stock. Rooney, Pace acquired the stock in early 1983 as the result of a company restructuring in which two subsidiaries were spun off to stockholders. The stock will go into the company's treasury to be used for an employe stock ownership plan. Scope handles defense work, including electronic warfare projects.