Heilig-Meyers is a 72-year-old Richmond furniture retailer that is growing at a speed one might expect from a much younger company. It operates 132 stores in small and medium-sized towns in Virginia, West Virginia, Georgia and the Carolinas and, during the last five years, its profits have grown at an annual rate of 25 percent.
The swift rise in Heilig-Meyers' revenue, earnings and stock price recently attracted the interest of institutional investors in Britain and Scotland who bought 430,000 shares of the company's common stock at $28 a share. That made it a $12 million deal.
The sale was generated by Heilig-Meyers' investment banker, Goldman Sachs, which was paid $1.10 a share, or about $473,000, for its efforts. The company, which sold 150,000 shares, got about $4 million from the offering. Family members and insiders who sold 280,000 shares pulled in about $7.5 million.
One of the company's founders, Hyman Meyers, his wife and three children sold 250,000 shares, half of their holdings, for about $6.7 million, and board member George A. Thornton III sold 30,000 shares for about $800,000.
After it was all over, family members owned about 20 percent of the stock and institutional investors, about 50 percent. Individuals had about 30 percent of the 6.4 million shares outstanding.
Heilig-Meyers showed an 86.1 percent increase in earnings on a 46 percent boost in revenue during the last two years. The firm does especially well in times, such as these, when interest rates fall. Many customers buy furniture on credit and pay the firm a 24 percent annual rate of interest. But the firm can borrow for about 8 to 9 percent. The bigger the spread, the better the company's bottom line.
In 1984, Heilig-Meyers turned in $9.9 million in profits ($1.60 a share) on $134.8 million in revenue. Profits for 1985 were up 18.2 percent over 1984, to $11.7 million ($1.88) on $167.9 million in revenue. The security analysts who follow the company are looking for 1986 earnings of $2.25 a share, a projected gain of 19.7 percent.
All of this has been reflected in the rapid climb of Heilig-Meyers stock, traded on the New York Stock Exchange. Selling at $18.38 in January, the stock closed Friday at $29.13, up 58.5 percent.
Michael Neviaser, a 31-year-old stockbroker at the Arlington office of Thomson McKinnon Securities, holds first place in the stock-picking division of the U.S. Trading Championship, a year-long, real-money competition sponsored by the Financial Traders Association. At the end of six months, Neviaser's portfolio is up 86 percent.
Neviaser's big winner is Hasbro Bradley (Amex), up 71 percent. Hasbro Bradley is the toy company that makes the phenomenally successful Transformers. Other stocks in his portfolio are Greenman Brothers (Amex), a toy firm; Charter Medical (Amex), hospital management, and TSR Inc. (OTC), computer services. Neviaser earlier sold off a couple of stocks that dropped, Clayton Homes (NYSE) and Gerber Scientific (NYSE). In any event, $5,007.26 has become $9,342.56.
With six months remaining, Neviaser is of a mood to hold onto Hasbro Bradley, in spite of its big run. If he switches stocks, however, his top choice is Telepictures Corp. (OTC), a distributor and producer of TV films and programs. Selling at about $27.50 a share, a large chunk of Telepictures stock is held by 60 institutions, an unusually high number. Also on his would-buy list are Summit Health Ltd. (OTC), hospital and nursing facilities; Dillard Department Stores (OTC), based in Little Rock, Ark., and Liz Claiborne (OTC), women's apparel.
Neviaser, who does his own research, says he looks for eight elements in the stocks he buys: price under $25 a share; price-earnings ratio under 30; ownership by institutional investors; under 10 million shares outstanding; five-year growth rate of 30 percent a year; a rise in the stock price of 30 to 40 percent in the past six months; a stock price within 20 percent of its all-time high, and interim earnings that are up at least 50 percent over the same period last year.
MBI Business Centers of Rockville, which used to trade as The Math Box, plans to issue an additional 1.2 million shares, bringing the total number of shares outstanding to 4.5 million. If the issue sells at about $11, the current price of MBI stock, it will produce about $13.2 million. Chairman Avner Parnes says the money will be used to pay for the recent $6.1 million acquisition of two stores owned by Microsource Financial Inc. of Boston, for future acquisitions and to help improve cash flow.
MBI, Parnes says, now has 23 company-owned stores; 14 of them are in the Washington area. MBI has staked out the area from Boston to Philadelphia to Washington as its prime operating territory.
Parnes says the current shakeout in the computer industry has had "very little" effect on his firm, which sells to business and government, but that the slump has weakened many one-store operations dealing in home computers. He likens the current situation in the computer business to the early days of the automobile industry, when the number of companies building cars was eventually trimmed from dozens to a handful. In the retail computer business, Parnes sees single-store operations vanishing, leaving behind a few chain stores.
MBI's revenue grew rapidly from fiscal 1984 to fiscal 1985, up from $16 million to $50.5 million. And the rise continued in the first quarter of fiscal 1986, ending April 30, with revenue up from $6.6 million to $17.6 million. MBI shares, which have been as high as $14.63, have dropped off in the last few weeks and closed Friday at $10.75.
Radiation Systems Inc. of Sterling, Va., manufacturer of sophisticated antenna systems, has joined the growing list of companies that have decided that their own stock is the best investment they can make. RSI, which has 4.6 million shares outstanding, recently bought back 50,000 shares on the open market at a cost of $492,000, or an average of $9.84 a share.
The buyback -- which amounts to only about 1 percent of the stock -- was meant to be a gesture of confidence in the future of the company, according to Bob Pevenstein, the firm's vice president for finances. Such a gesture seemed necessary because, after six years of high growth, RSI has hit a down year in which earnings are expected to fall off to about 70 percent of last year's.
RSI reported trouble with its earnings in the third quarter, ending in March, when earnings dropped from 25 cents to 10 cents a share. The company, whose 1985 fiscal year ended June 30, is expected to report a down year of 65 to 70 cents a share, instead of the $1.05 projected earlier, said analyst May Graves O'Leary of Scott & Stringfellow in Richmond. The firm earned $1 a share in 1984.
RSI's problems have focused on delays in contract awards -- both government and commercial. But the company is hopeful, O'Leary said, that it will be able to announce new contracts soon.
RSI stock has ranged in price over five years from $27.69 to $2.28. It closed Friday at $11.25 a share.