Conference nyoss1::market_investing

    SLM is up over 25% (16 - 20 3/4) since your note.  Good tip.
    
    Any more info on the company?

>    Any more info on the company?

I don't have much more to add beyond the original write-up.
I do know that the exercise equipment (Stairmaster Plus and Super Step Plus)
is selling particularly well.  Sears and Pennys have it in their catalog
and are reordering "big time".  During my recent strolls through Lechmere and
Bradlees I noticed this equipment displayed prominently.  I know the
hockey jerseys are also selling as fast as SLM can make them.  And I
believe the Batmobile ride-on vehicle is selling very well.  I don't
know about Buddy L Voice Command toy trucks....I hope all is well there
but I havn't received any specific information on that line.  Overall
though, its clear that sales are up strong, if not booming.

At $21/share, the stock still seems like more of a buy than a sell to me,
although I liked the risk/reward ratio better at $16/share.
Basically, I'm holding here and looking to ride to higher highs.

    
    Pardon my ignorance, but I see no listing for SLM in my local paper. 
    What am I doing wrong? 

    It is in NASDAQ under SLM.

    Up to 23...

	SLMI recently announced that they have developed a battery charger
	for normal *alkaline* batteries. The charger apparently works for
	even a mixture of alkaline and NiCad batteries. Stocks of battery
	companies such as Duracell fell quite a bit that day. 

	So, Jeffrey, is this still a good buy?

Amitabh, I think it's still a good long-term buy at 25, but it is 
no longer the screaming buy it was 9 points and 3 months ago.
Business remains very strong across all SLM product lines, and new
products are coming out shortly like the Harley-Davidson ride-on vehicle,
Ultimate Gym fitness equipment, Buddy L battery recharger, and Reebok 
Pump hockey skates.  It wouldn't be surprising to see the stock hit 40
later this year or early next.

The day of the SLM battery recharger announcement (Jan.27) was an
interesting day.  A friend of mine on Wall Street who is aware of the 
fact that my clients and myself have significant holdings of SLM was 
kind enough to feed me analyst reactions to the announcement throughout
the day.  It was entertaining to listen to Duracell term the recharger
as "not capable of recharging alkaline batteries" early in the day and
then term the recharger "unsafe" and "uneconomical" later in the day.
A prototype of the battery recharger will be on display at the annual
Toy Fair in NYC next week.  SLM plans to sell it initially via
television infomercials this summer.      -  Jeff

    
    There is a detailed article in today's WSJ on SLMI and its new product.

    SLM hit 32 on 5/19 - that's a 2 bagger so far.

    My broker told me that SLM is announcing both a 3 for 2 split and a
    dividend.  In addition, it is up near 46, almost a 3 bagger from the
    first tip here at 16.  It's my best stock buy to date.  And with their
    hockey equipment, roller blades, gym equipment and battery rechargers,
    there may well be more growth to come.
    
    Thanks for the original tip.  
    
    PS - I also purchased your other tip, Gundle, and that has also almost 
    doubled!

  Thanks for the very kind comments.  I do have another strong
  stock tip, but I have to make sure all the people that pay me
  for my investment work have had an opportunity to act before
  I post anything in the notesfile.  I may do a post of my most
  recent write-up fairly soon if the price is still right, since
  you asked.  Thanks again.

  Continued good luck with SLMI and GUN.

    
    And I've been an observer wishing I had purchased at 16.
    
    steve

    SLMI is down to $14.  What is happening to this stock?
    Is this still a good buy now that is has been hammered
    down?
    
    Dan

>What is happening to this stock?

I had hoped to be able to post something in this note earlier than this,
but because the company was not very forthcoming it is only now that I feel 
I finally have a good grasp of what has happened with SLM's business (and 
hence its stock).

The stock was a casualty of the surprising $8.6 million loss (-.46 per share) 
reported for the 4th quarter of 1993.  It was most surprising because it 
immediately followed a quarter of record sales and earnings.

Here are the details -

Sales grew rapidly once again in 1993 - by 36% - from $231 million in 1992 
to $315 million in 1994.  The big problem was that SG&A expenses (Selling,
General, and Administrative) grew by 70%, thereby shrinking profit from
$16.3 million (.96/share) in 1992 to $8.1 million (.42/share) in 1993.  
(Most of the increase in expenses occurred during the 4th quarter)

The main reason behind the surge in expenses was an increase in advertising.  
SLM greatly increased advertising in 1993 but had little extra revenue to 
show for it.  The most dramatic case in point was evidenced by the advertising
of the Buddy L Voice Command Crusher toy truck.  The Crusher was expected
to be a hot Christmas product, but initial sales were weak, and SLM responded
by greatly increasing television time for the Crusher.  This was a mistake
since the product was a weak one, and the advertising didn't save it.

Gross Margins (the percentage of a sale that the product actually contributes
to profit exclusive of other costs) were little changed from year to year,
but this is deceptive.  A lot of the expected costs of a product are found
in SG&A - like advertising for instance - and it appears that SLM, in their
drive to increase sales, did a poor job of costing some of the Buddy L products
in 1993.  [Incidentally, some believe DEC has similar cost accounting 
deficiencies]  SLM has responded by hiring their auditors to implement a
new internal accounting system at the company.  They have also moved the CFO, 
Kenneth Bloom, to "special projects" while they search for a new CFO - and 
they have begun replacing a number of Buddy L executives.  

There were other problems that impacted the 4th quarter in particular, so
let me list them quickly.  Tyco Toys was successful in getting an injunction
which prohibited Buddy L from selling another potentially hot Christmas
product called "The Wild Ones" (remote control trucks).  There were 
manufacturing problems with the Harley-Davidson ride-on vehicles which
prevented SLM from shipping $5 million in orders during the 4th quarter
(subsequently resolved and shipped in Q1).  The previously hot sporting
goods product called the Stairclimber Plus abruptly reached the end of its
product cycle.  And finally, a FASB accounting change effected the way
a barter exchange could be reported, resulting in lower revenues.  When SLM
realized the 4th quarter was going to be a disaster, they also accelerated 
some expenses into the 4th quarter that would have been deferred otherwise 
(related to royalties, bad debts, and new facility costs). 

Now for a few positives - 
There were many pluses to offset these problems.  SLM has a great many 
quality products that continue to sell very well.  For instance, the entire
Sporting Goods division had a great year despite Stairclimber reaching end
of life.  SLM's product set is very diverse, and their largest product
divisions have been mainstays for decades (CCM and Buddy L).

We should see a nice rebound in 1994.  Kidder Peabody is still projecting 
record sales and earnings for the year.  They estimate earnings of 
$1.30/share - which hopefully will be met.

For the short-term, the stock is intensely out-of-favor with investors and 
it will take time and also some good earnings reports for SLM to rebuild 
investor confidence and enthusiasm.   Where the stock will finally bottom 
is anyone's guess. There are no immediate earnings or technical support 
levels to contain the move down.  Longer-term, the stock has tremendous 
upside potential as it is severely undervalued relative to other toy companies.
For instance, Mattel and Hasbro have a stock market value of 170% of their 
total sales.  SLM had the same valuation last year, but with the stock now 
at $9/share, SLM has a current market value of merely 45% of 1994 sales.

I'm hoping for the best.  The Zunenshine family (who own 42% of the company) 
never sold any shares.  They have an excellent track record and they remain 
committed to building this company over the long-term. I'm hanging in there too.

    
    What next for SLM?  Seems like the stock had a run-up from $8 1/4 to 
    the current ~$11 based on the belief that things really weren't going
    to be as bad as feared.  Results for their last quarter were a 7 cent
    loss, versus a 7 cent profit last year.  Was this a sucker's rally,
    making people think it was going back up only to give the broker's a
    chance to cash out?
    
    I'm quite interested in this stock and would appreciate some commentary
    on the recent results.  It looked good when in the $8's, I just didn't
    act fast enough.  Now that they have had their 2nd quarterly loss in a
    row, a price around $11 doesn't look very enticing!!!
    
    Thanks for any info :-)

I don't have much to add beyond my last note except that the Q1 actual
results were 3 cents better than the Kidder Peabody estimate.  Kidder
was estimating a 10 cent loss for the quarter and $1.30 EPS for the year-
which is still their 1994 estimate (not changing to $1.33 I guess :) )

Sales were up 37% for the quarter...to $63.7 million.  (Q1 is traditionally 
the weakest quarter of the year)  Toy sales were up 29% year over year, while
sporting goods were up 41% year over year.

I remain optimistic that the stock will once again be a big long-term winner,
but I feel the short-term is pretty unpredictable.  If the recovery in the
business continues as expected, then we could see substantial earnings again
in Q3 (when most Christmas shipments occur) - and that should help the stock.

>I remain optimistic that the stock will once again be a big long-term winner,
>but I feel the short-term is pretty unpredictable.  If the recovery in the
>business continues as expected, then we could see substantial earnings again
>in Q3 (when most Christmas shipments occur) - and that should help the stock.
    
    This stock is fast going into oblivion.  Are you still optimistic?
    
    db

>This stock is fast going into oblivion.  Are you still optimistic?

Not very.  What a thrilling ride up, and a horrifying ride down this
one has been.  What optimism I have remaining is based on the fact that 
this is still the same management that bought several bankrupt companies
in the '80s and rapidly built SLM into a large and profitable (usually) 
toys/sporting goods company.  Also, management has a strong vested interest
in seeing the common stock improve given that they own about 40% of the stock.
The dark side to this management is that when things don't go well (like over 
the last year) they hole up and shutoff the information spigot.  On top of
that the one analyst who really covered the firm, Gary Jacobson of Kidder
Peabody, got canned in the Kidder takeover by Paine Webber.  

Christmas sales were OK this year, but not fabulous.  The two advertised
products that SLM and retailers both thought would be big hits were
disappointments.  SLM is going back to the basics now and will no longer
advertise, but rather will pass the savings to the retailers.   Buddy L (toys) 
and the fitness line remain the problem areas of the company - and both
have been undergoing a big shake-up since summer.  Buddy L is getting hit 
from the cost side pretty hard now too with the big increase in plastic 
resin prices.  Sporting goods, the CCM division, continues to do very well 
and is a very valuable franchise.  The end to the hockey strike can only 
help them.

SLM stock was beaten as low as 2 1/2 in December.  There have been rumors
of bankruptcy for months - SLM has a heavy debt load and they have violated
their loan covenants.  They appear to have made it through the Christmas
selling season when cash needs are greatest though, so they may be out of
immediate danger.  In the meantime, rumors of a takeover are circulating
and became believable enough that some large institutions started buying
heavily a couple weeks ago, pushing the stock to 7.  After the rumors were
dispelled by Dan Dorfman on the primary financial network the stock came
crashing back to 3 1/2.  It has spent the last week slowly recovering 
a bit and closed today at 4 3/4.

At this point it looks like a pure speculation to me.  If the company survives
the stock could make a dramatic recovery - as stocks that emerge from "near
bankruptcy" often do.  However, this company is now in a position where they
can no longer afford any slip-ups.  Time will tell.