United & Babson Investment Report, Wellesley Hills, Mass., favors Alex. Brown & Sons Inc. (NYSE, AB, $17.75), the Baltimore investment bank and brokerage which reported record revenues and earnings last year.
"Investment banking revenues were led by surging initial public offering markets and financings for existing public companies, while commission revenues were driven by the higher stock and bond markets and heavy volume. Over the longer term, we see value in the firm's ability to expand on its traditional franchises. Meanwhile, the shares are very cheap based on current earnings. We recommend purchase."
R.H.M. Convertible Survey, Glen Cove, N.Y., flags Legg Mason Inc. (NYSE, LM, $21.875), noting that the Baltimore-based brokerage house derives much of its income from the activity of individual investors.
"There is no question that individuals are still in the market with both feet. Commission revenues at Legg Mason surged 19 percent in the first nine months of the current fiscal year. Share net for fiscal 1991 should approximate $2.25, a strong follow through to the previous year's $1.52. We recommend the Legg Mason 7 percent convertible bonds of 2011; we believe these convertibles will continue to share fully in the upward march of the common stock."
"Tampa, Fla.-based Outback Steakhouse (OTC, OSSI, $30.25) is positioned in an attractive market niche in the restaurant sector due to its distinctive concept and strong price-to-value perception," notes Steven Rockwell, Alex. Brown.
"The chain has outstanding unit-level profitability, with the operating return on investment in the 30 to 35 percent range, which is one of the highest of any company we follow. The company recently added eight new company-owned units. It also acquired the unowned portion of seven joint-venture restaurants in southern Florida. The firm has a projected three-year earnings per share growth rate of 30 to 35 percent annually."
Watsco Class B
The Insiders' Chronicle, Bethesda, points out that some major institutions have taken positions of 1 percent of more in Watsco Inc. (AMEX, WSOB, $10.75), a Coconut Grove (Fla.) distributor of residential air conditioning equipment, and owner of Dunhill Personnel Systems.
"President Albert Nahmad points to two regulatory developments that are likely to enhance results. First, new efficiency requirements for residential central air conditioners should generate fresh revenues. . . A second set of regulations, prohibiting the venting of refrigerants into the atmosphere, has launched Watsco into a new business -- the marketing of refrigerant recovery systems."