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Intrinsic Value Asset
Management, Inc.
P.O. Box 2415
Malibu, CA 90265
April 26,1999
Investments & Finance
By Benjamin Mark Cole
Page 49
Maker of Fiber-Optic Cable May Have Good Prospects
It may seem as if all Internet stocks were bid up to the sky, only to get whacked around last week. But some Web stocks are different - they already had been whacked around before, and so might now be a good buy, says Ken Luskin, president of Intrinsic Value Asset Management, a money management shop in Malibu.
Luskin likes to buy small-cap stocks, but only when he thinks the downside is limited.
Alhambra-based Ortel Corp. fits the mold. Ortel makes high-tech gadgetry known as hybrid fiber-optic coaxial cable. In a nutshell, some of Ortel’s product line is used to make cable television lines Internet-ready. Already some Angelenos in certain service areas can log onto the Web through its cable television lines, and download or transmit information far faster than through ordinary, or even upgraded phone lines.
Luskin believes that cable systems nationwide will jump on the Internet bandwagon, and thus Ortel should be in good position.
"The cable companies are going to be moving to upgrade their systems," said Luskin. "Not only to carry video and other Internet services, but to handle voice."
The risk-averse Luskin also points out that Ortel is on the infrastructure side of the Internet fence, which some investors, such as Frank Kline of the Westside-based Kline Hawkes & Co., venture capital firm, think is the way to make your Internet bets.
Luskin also likes Ortel because it has no debt and does not lose gobs of money. For the year ended June 30, 1998, net income was $2.7 million (22 cents per diluted share), off considerably from $8.3 million (67 cents) the year before. Its '98 revenues of $76.9 million were down from $82.6 million in fiscal '97.
Nonetheless, Luskin likes the company s prospects, especially with the stock trading as of last week at about $6 a share, way down from its 52-week high just north of $20. "That removes a lot of risk of overpaying," said Luskin.
New management has been brought in, and the board has stock positions, which Luskin also likes to see in an investment. Still, Luskin acknowledges that buying small caps is a precarious game.
He is wrapping up an investment in Waltham, Mass.-based Immulogic Pharmaceuticals Inc. That company appeared to have enormous upside potential, based on its biotech research on “vaccines”, which would eliminate the pleasure, and thus temptation, of cocaine and tobacco for vaccinated drug users. But Immulogic ended up selling the technology for about $9 million worth of stock in another company - enough to prevent Luskin from losing money on his investment, but hardly the mother lode.
"There are no guarantees in this world." said Luskin. "But if you pick the right situations, even if things go wrong, maybe you can at least avoid losses."