Not Much Fab at This Investor Confab


By Gene Marcial Doom and gloom, obviously, is the prevailing investor sentiment right now. And it was quite palpable at the 32nd Annual Investment Conference sponsored by Bank of America Securities that opened on Sept. 23 in San Francisco. Fueling the pessimism were the overly cautious presentations made by various CEOs and CFOs at the conference. They were careful to come across as properly straightforward and not appear too optimistic or aggressive in the wake of corporate accounting probes now going on.

However, amid the downbeat feelings and dark outlooks, several companies stood out for their unexpected optimistic forecasts, Among them: Harrah's Entertainment (HET), MGM Mirage (MGG), and Mandalay Resort Group (MBG), in the gaming industry; Murphy Oil (MUR) in the energy sector; Amazon (AMZN) and eBay (EBAY), among Internet consumer companies; and AppleBee International, (APPB), among restaurant chains.

For the most part, however, many of the top execs went out of their way not to be misconstrued or misunderstood in any aspect of their statements, for fear of being blamed later should something go awry, note several major New York investment managers. So they really had nothing much new to say, and certainly no earth-shaking statements were made. "That turned many of their stories into very boring and dull dissertations," says William Harnisch, president of New York investment management outfit Forstmann Leff Associates.

SPARSER CROWD. And because of the accounting investigations going on and the scandals at Enron (ENRNQ), Tyco Internatinal (TYC), and WorldCom (WCOEQ), among others, the conference featured no so-called breakout meetings. In previous years, corporate chief execs or chief financial officers held private breakouts with selected investors, where they explained and spelled out projections of where earnings would come from. Investors got a "very real perspective" of where the companies were headed. None of that this year.

Not only were investor spirits depressed but attendance was also down. Slightly less than 2,000 corporate chiefs, money managers, and institutional and individual investors showed up this year, down from the 2,200 that came in 2000. The conference in 2001, which opened on Sept. 10, had to be canceled the following day because of the terrorist attacks.

The Bank of America conference (previously called the Montgomery Securities Investment Conference before BofA acquired Montgomery) was a must-attend in the 1980s and 1990s -- largely because so many technology companies showed up to make presentations. This year, the tech presenters included Cisco Systems (CSC), IBM (IBM), and Microsoft (MSFT).

DON'T READ MY LIPS. Companies in other industries, representing both the large-cap and mid-cap universe of stocks, that also presented business plans at the four-day conference included 3M (MMM), AOL Time Warner (AOL), Walt Disney (DIS), Boeing (BA), Abbott Laboratories (ABT), Genentech (DNA), MetLife (MET), Fannie Mae (FNM), Coca-Cola (KO), and Clear Channel Communications (CCU).

Because of the weak economy, the tech presentations were more negative than in previous years. Cisco CEO John Chambers provided no new guidance when he spoke before a luncheon crowd on Sept. 23. He warned his audience: "Don't try to read into anything that I say here, other than what I am really saying."

During the question-and-answer session that followed, Chambers' responses about the outlook were even more uncertain and cautious. Certainly, he didn't exude optimism. Cisco's stock dropped that day, to $11.96 a share from $12.09 the previous session. It then fell to $10.19, a 52-week low, on Oct. 1.

UPBEAT SURPRISE. Novellus Systems (NVLS) also made an uninspired presentation on Sept. 23: Its stock fell to a 52-week low of $20.77, down from the previous session's $22.15. It closed at $20.81 on Oct. 1.

One tech outfit that came out with a surprise upbeat forecast on Sept. 24 was Veritas Software (VRTS): Its stock jumped from to $16.09 a share from $13.72 on Sept. 23. It has since eased to a close of $14.45 on Oct. 1.

Among other companies that many attendees found dull included AT&T Wireless (AWE), Sallie Mae (SLM), Gilead Sciences (GILD), and Colgate-Palmolive (CL).

BLACKJACK AND BLACK GOLD. On the other hand, the gaming companies -- Harrah's, MGM Mirage, Mandalay, and Station Casinos (STN) -- predicted higher earnings in spite of the recession and the drop in air travel. They're all generating healthy free cash flow, which has helped them clean up their balance sheets and pay off debt.

"Now that they have completed their major expansion and construction projects, these casinos are now done with their large expenses and will therefore see increased earnings in the years ahead," says Forstmann Leff's Harnisch, who has been accumulating gaming stocks. Harrah's is up to $48.11 a share as of Oct. 1 from $46 on Sept. 25; MGM to $37 from $34 on Sept. 24; Mandalay to $33.80 from $32 on Sept. 24; and Station Casinos to $17 from $16 on Sept. 25.

Shares of Murphy Oil, which on July 31 announced a big crude discovery in Malaysia, jumped to $82.43 a share on Sept. 25 after its presentation, from $79.55 the previous day. It went into some detail about what the "significant" oil find portends for the company. On Oct. 1, the stock traded at $82.75. Harnisch says new oil field could have a tremendous impact on Murphy's earnings.

Considering the Iraq situation, oil stocks may indeed stay hot for sometime. And the gaming companies, as well as restaurant chains, could well be reflecting consumers' increasing demand for "happy" pursuits to counter the big worries they're finding nearly everywhere else -- especially on Wall Street. Marcial is BusinessWeek's Inside Wall Street columnist


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