LDDS rides high on insider trading.

Four years ago not many people on Wall Street had heard of LDDS Communications (NASDAQ symbol: LDDS), a small Southern long-distance telephone carrier. Today, the company is breathing hard on the heels of the leaders of the pack (AT&T, MCI and Sprint), and Wall Street is all ears.

Even though two LDDS regional vice presidents settled with the Securities Exchange Commission on insider trading charges, the company's prospects for future growth haven't dimmed.

In June, SEC officials said Philip Sheridan and Gilbert Carpenter agreed to forfeit more than $47,000 and $1,300, respectively, in alleged trading profits, and pay an undisclosed amount of interest on those profits as well as civil penalties. The SEC said both men pleaded "no contest" to trading in company stock before the public was aware of LDDS' acquisition of Advanced Telecommunication in 1992.

The revelation of possible misconduct made no impression on Wall Street investors, as weeks later LDDS went ahead with a sweet deal for WilTel, the gemlike long-distance unit of the Williams Companies.

The deal, which cost LDDS $2.5 billion in cash to complete, added $1.2 billion from WilTel's annual revenues to LDDS' coffers.

The company's sharklike approach to acquiring every company in its line of vision is clearly evident, because shortly after the WilTel deal, industry analysts noticed LDDS salivating at the next target--IDS Communications Group. That transaction, pending at BE press time, is said to involve a stock swap worth $700 million. If the deal is completed, it will be the nineteenth telecommunications sector firm that LDDS has bid on or acquired since 1990.

Industry analysts have said that with the acquisition of WilTel, LDDS expands its reach and creates profit centers in several areas. Among the most lucrative are WilTel's premium fiber-optic network accounts, which include the telecommunications traffic of MCI. Another perk is WilTel's network swapping arrangement with MCI that allows LDDS access to MCI facilities at a discount.

For individual investors, it's too late to get in on the LDDS action through one of its earlier private placements, or even its initial public offering, but with recent closing prices hovering around $18.75, it's worth talking to your broker, getting a prospectus and reading more about this dynamic company.

Even though past performance is no guarantee of future gains, consider this: If in 1990 you had hitched your investment wagon to the spirited horses of this Jackson, Miss., company, you would have seen your per-share earnings increase from $.26 to $.85.

Industry historians have reported that even though LDDS pays no dividends on its outstanding common stock, the price has been as low as $.25 a share between 1971 and 1992, and as high as $29.50 this year.

At the end of the first quarter this year, LDDS posted revenues of $411.28 million compared with $219.01 million during the same period in 1993. According to LDDS' financial statements, "Strong growth in the first quarter is a result of last year's merger with Metro Media Communications Corp. and Resurgens Communications Group."

That transaction was actually a series of complex swap and valuation arrangements, but the bottom line is, after the dust settled, operating income had doubled and LDDS is bigger, more efficient and still inexpensive.

WISE WORDS

ANITA ROBERTSON, financial consultant, Private Client Group, Merrill Lynch, Los Angeles, 800-456-8790, shares her thoughts on structuring a portfolio for clients interested in hedging against inflation. "I develop strategies to achieve individual client goals. I diversify portfolios for long-term preservation of capital, and allocate assets to stocks, bonds and mutual funds." Robertson stresses that the portfolio she structures hinges on the specific goals and investment temperament of the client. The income and growth preservation model she endorses is: 50% blue-chip stocks, which she says have had a 10% to 12% average return since 1920; 40% short-term bonds, like treasuries and corporate securities; and finally 10% in "cash on hand" instruments, like money market mutual funds and CDs. "I also 'ladder' securities for some clients," she explains. "Laddering" involves staggering credit investments so that they mature at successive and revolving periods.