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Inside Wall Street


Bristow: A Stronger Lift from the Helipad?

One guy who likes bargains is Curtis Jensen, co-chief investment officer at New York's Third Avenue Management. But even among value investors, he says, price takes second place to "an impregnable financial position that can weather downturns like the current one. Also crucial is confident management with identifiable paths to growth." Bristow (BRS), a leading provider of helicopter services to the offshore energy industry, fits that bill, says Jensen. The stock, now at 24.51, has tumbled from 59 because of losses tied to Hurricane Ike and lower oil prices. Jensen, who owns 10% of shares outstanding, says the stock is worth twice its current price. For one thing, Bristow's 500-odd choppers are valuable, with a ready secondary market among law-enforcement and medical interests. Also, Bristow is flush, with $400 million in cash.

Fund manager Craig Hodges of the Hodges Fund is a recent buyer. He pegs 2009 earnings at $3.40 to $3.50 a share and $4.25 for 2010. "People are misdiagnosing this stock and tying it to oil," says Hodges. "Drilling is dying, but [serving exploration sites] is less than 20% of Bristow's business. There's a lot of value here trading at five times next year's earnings." Another nod to Bristow's worth: Its main rival, CHC Helicopter, was scooped up in September by First Reserve, an energy-based private equity firm in Houston, for 10 to 12 times trailing EBITDA.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

American Italian Pasta Is Cooking

American Italian Pasta (AIPC), maker of Mueller's and other brands, got in hot water during the Atkins low-carb craze. When sales sank, "management cooked the books to make the numbers," says William Chappell at SunTrust Robinson Humphrey. On Sept. 15, former execs settled an SEC securities fraud charge.

New CEO John Kelly, formerly at Kraft Foods (KFT), returned AIPC to profit in 2007, and it now trades again on the Nasdaq. Chappell calls AIPC "a great story" and pegs the stock, now 23.08, at 30. With pasta consumption expected to soar in these lean times, he has raised his 2010 earnings estimate to $2.05 a share, up from $1.40. And AIPC's big private-label business caters to grocery chains and club stores that are positioning their own brands against name brands. Timothy Ramey of D.A. Davidson writes in a Dec. 11 note: "They have emerged stronger than ever."

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

T. Rowe Price for the Long Haul

Asset manager T. Rowe Price (TROW), now at 33.42 (down from 70 a year ago), still trades at a premium price-earnings ratio of 22, vs. 14 for its peers. Pressure on the stock stems from analysts' downgrades in the financial sector--in view of market losses, redemptions, and steep declines in assets under management.

Is it time to buy T. Rowe? "It's a great company, but the near term is messy," says D.J. Neiman of William Blair. T. Rowe, a no-load fund firm, has cash of $3 per share and no debt. It has a solid retirement business with "management that is client-centric and focused on the long term," he adds.

Morningstar (MORN) says T. Rowe is the No. 4 manager of U.S. diversified funds by assets but No. 2 by performance. "The only knock is the macro environment," says Greg Estes, manager of the Intrepid All Cap Fund (ICMCX), a T. Rowe investor.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Gene Marcial is on vacation.


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