Bargain hunter.

Green of Loomis Sayles is always looking for good deals

Loomis Sayles director Isaac Green will tell you value investors like himself come in two varieties. First, there are scavengers, the kind that lunge at the bargain bin in the name of saving money. They're out snatching up shares the minute a company announces bad news and watches its stock go down in flames. Green? He's in the second camp, a choosier group that waits for the name brands to be marked down, all to get top-of-the-line goods at sale prices.

That distinction is important to Green, whose Detroit office manages $9 billion in institutional money for clients such as Blue Cross/Blue Shield, the state of Illinois and White Castle, a fast-food company, along with the Loomis Sayles Core Value Fund. "It's not enough that a stock's gone through a big drop and is cheap," he points out. "We want to see evidence that we're going to get something back for our money." The proof, says Green, is in the profits. Turn in two quarters of good solid earnings, win back investors on Wall Street, and suddenly Green's interested. "Six months after the bottom, we're probably going to be around sniffing," he says. It's a policy that has worked well. Green's institutional accounts posted a 29.3% total return in 1997. They've averaged 29.4% over the past three years and 20% over five years.

Green's screening process is pretty clear-cut. First, he limits himself to companies with a market cap of $2 billion or more for about 1,200 stocks in all. For a company to pass grade two, its price-to-earnings ratio (P/E) must be below the average i;n its industry, and definitely under the S&P's current multiple of 22. Additionally, Green says he looks for shares where earnings growth is at least stable, but preferably on the rise. "We go through Wall Street estimates month by month, and when we see that analysts are revising earnings upward, we've got a winner."

Something of a financial journeyman, Green grew up in Henderson, outside of Durham, North Carolina. He began his collegiate studies at nearby Duke, majoring in engineering, but quickly got the economics bug. "I thought, `this is physics applied to money,'" he recalls. Green clanged his mind and major, going on to complete an M.B.A. at Columbia University. He followed up his studies with stints at Nations Bank and BE 100s financial company NCM Capital Management before joining Loomis five years ago.

After more than 10 years in the business, Green makes stock picks using a logic even a lab-worn scientist could appreciate. His first choice, Hasbro (NYSE: HAS), is cheap, currently selling at about 18 times projected 1998 earnings, and 20% below the market's current P/E. Green says the toy maker is poised to grow earnings 20% next year because Hasbro's the lucky owner of the Star Wars figurine franchise. Next year's release of Star Wars' latest installments should prove a blockbuster for Hasbro. Even after that, Green projects earnings growth to continue at a 13% pace over the next five years.

Green calls his next pick, Carmike Cinemas (NYSE: CKE), the "WalMart of the movie theater business." Not only does Carmike own 2,700 screens in 35 states; in 60% of its markets, it's the only cinema in town. Even with that kind of leverage, the stock is cheap, currently selling at 15 times estimated 1998 earnings. Green says earnings should jump 22% this year and after that continue on an 18%-20% annual dip over the next five years.

Another favorite, Green says, is Compaq Computer (NYSE: CPQ), a steal at its current P/E of 16 times 1998 earnings. Recently, the PC and networking hardware maker has been trading at low levels because of worries over its Asia exposure and also because a new software package like Windows '95 hasn't come along to propel sales. Still, Green thinks the company is good for a 25% increase in earnings this year and around 20% for the next five years.

Pharmaceutical maker American Home Products (NYSE: AHP) was left at the altar when British drug manufacturer Glaxo backed out of their planned merger earlier this year. Green saw that move as a "go" signal, especially since AHP is trading at 25 times projected 1998 earnings, compared to 30 for its industry peers. Green says AHP has some great products coming up and should grow earnings at a 13% rate over the next five years. Besides that, the company still remains a takeover candidate, he says.

To round off his list, Green's including a familiar name, Sears (NYSE: S). After trading as high as $65 last July, the Chicago retailer's stock came tumbling down as worries rose over its rising credit card default rate. Green says the problem just wasn't great enough to derail a company he thinks is well managed. Sears has since set its credit card business back on track, and with the stock selling at 16 times 1998 projected earnings, it's cheap. Green sees Sears notching earnings growth of 12% this year, and 14%-15% over the next five years.

Attention Bargain Shoppers

                                                    Est.
                                                    5-Year
Stock                                  Current      Annual
(Exchange: Symbol)                     Price(*)     EPS
                                                    Growth     P/E

Hasbro (NYSE: HAS)                     $34.94       13%        18
Carmike Cinemas (NYSE: CKE)             32.50       19         15
Compaq Computers (NYSE; CPQ)            26.25       20         16
American Home Products (NYSE: AHP)      91.75       13         25
Sears (NYSE: S)                         56.00       15         16

(*) As of 3/30/98