Art & Commerce




Logical Analysis Direct marketing stands to outgrow general advertising as targeting techniques get better, and as the cost of mailing a sales pitch or making one on the phone improves in relationship to the escalating cost of using mass media. That, according to a recent analysis by Bear Stearns, explains why the industry is attractive. Analyst Alexia Quadrani calculates that $1.00 spent on direct marketing delivered $7.92 in sales in 1992, $8.05 last year and projects a further increase in efficiency, to $8.72 in sales per dollar spent on direct marketing, in 2002. The industry is a tough one for portfolio managers to get cozy with; there’s a hodgepodge of companies, most of them small and none truly comparable to the others. There’s also the junk-mail prejudice to counter. Unique companies, with small market capitalizations, in any industry unfamilar to investors can be volatile and, therefore, somewhat risky stock selections. Of the eight stocks recommended in early May, only one, Harte-Hanks, is up; of the rest, only one, Snyder Communications, dipped less than the Dow Jones. But, as a stockbroker might say, if you liked them higher, you’ve got to love them here. The investment logic hasn’t weakened, just the stock prices. –Alan Gottesman (westendal pobox.com) is principal of West End Consulting.

THE GOTTESMAN FILE
Recent stock-price performance of selected direct-marketing companies

……….5/6/98…..6/15/98…..Change

…..Harte-Hanks…..21.75…..22.56…..3.7%
…..Snyder Comm……40.50…..39.56…..-2.3%
…..DJIA…..9,147.07…..8,627.93…..-5.7%
…..Valassis…..39.00…..36.38…..-6.7%
…..Advo…..30.00…..27.44…..-8.5%
…..Big Flower…..33.25…..29.75…..-10.5%
…..Catalina Marketing…..48.63…..43.50…..-10.5%
…..Acxiom…..24.88…..21.19…..-14.8%
…..Cultural Access…..14.00…..9.75…..-30.4%

Sources: Bear Stearns, West End Research