Maverick chief elicits faith with folksy style. (Up Front).

It's not often that investors bid up a company's stock even as they declare scant interest in its underlying business.

But with operating divisions handling recycled breadcrumbs, animal feed and beauty schools, shareholders of Scope Industries are banking on the wits of one man, Chief Executive Meyer Luskin.

Shareholders, likening Luskin to Berkshire Hathaway's Warren Buffett, say it's his ability to make good investments that has brought value to Scope. Also, like Buffett, he has a folksy side, such as in a 2000 letter to shareholders, where he begins: "This past year typified the concept of 'yin and yang,' 'sweet and sour,' or, being dramatic, 'the agony and the ecstasy.' Which do you want first, the good news or the bad?"

Luskin's most recent play: Scope's 1990 investment in start-up optics firm Opto-Sensors Inc., which has since changed its name to OSI Systems Inc. and gone public.

OSI, which makes optoelectronic devices for use in medical and security industries, has seen its shares surge from $7.16 on Sept. 17, the day the markets reopened, to close at $24.82 on March 6, a climb of 346 percent - largely because of its work in airport security technology. In lockstep with OSI, shares of thinly traded Scope have climbed from $44.50 on Oct. 1 to $60 last week.

According to OSI's October 2001 proxy statement, Scope held just over 1 million, or 12.2 percent, of OSI's outstanding shares.

OSI officials did not return phone calls seeking comment.

As OSI's stock price has risen, Scope is lightening its load. In early February it registered to sell 465,000 of its shares of OSI for around $10 million. Through a series of sales, Scope has reduced its stake from 18.3 percent in 1997 to 10.6 percent. Scope's remaining shares are worth $21.6 million, more than one third of its own $61.7 million market capitalization.

Liquidation value 

Therein lies much of its appeal.

At 76, Luskin is at the helm of a business where the liquidation value is greater than the market cap.

"The chairman is an old guy, and that's generally a positive for shareholders," said Andrew Berger, publisher of Walker's Manual of Unlisted Stocks. "The older the control, the more likely a sale will occur."

Still, for all their diligence in researching Scope and its various investments, investors have a certain amount of blind faith in Luskin's investment acumen. One investor said about 30 percent of his portfolio is comprised of Scope stock, adding with a nervous chuckle that he knew it was unwise to be so heavily invested in one particular company.

Scope's waste material recycling division, which generates more than 90 percent of its revenues, turns bakery waste material into food for dogs, cats, cows and poultry -- as well as into breadcrumbs sold to food processors for human consumption. In addition, Scope Industries' Vocational School Group operates 11 Marinello Schools of Beauty in Southern California and two in Nevada.

Scope reported a net loss of $182,569 for the second quarter ended Dec. 31, compared to a loss of $1.1 million in the like year-earlier quarter. Second quarter revenues were $16.4 million, vs. $14.9 million in the second quarter of 2000.

But Luskin continues to reward shareholders as he cashes out Scope's various investments. For the past three years, Scope has issued an annual dividend of $1.00 per share. At the same time, the value of its assets -- which include investments in OSI and a handful of other technology companies -- remain greater than its market cap.

At the end of fiscal year 2001 ended June 30, total assets were $71 million, down from $82.8 million in the like year-earlier period. Total liabilities were $13.9 million, down from $16.3 million in 2000.

Tight lipped

The only way to gain insight to Scope is through Securities and Exchange Commission filings and the handful of investors who religiously follow the company. Institutional holders keep the stock in passively managed funds, and no equity analysts follow the stock.

Luskin, who said he always returned phone calls, declined to comment for this story, adding that he hadn't talked to the press in more than 40 years and he didn't see any reason to start.

According to company filings, in addition to OSI (and Scope) Luskin holds a seat on the board of Chromagen Inc., Metaprobe LLC and Stamet Inc. -- companies in which Scope has a stake.

Chromagen develops gene expression technologies that it has built into a portfolio of products sold into the pharmaceutical and research markets. To date the company has raised over $30 million from various investors, including Scope.

Last July Scope participated in a $5 million round of Series A funding for Metaprobe, a San Diego-based firm that develops physiological imaging technology the company is looking to use in the discovery and development of pharmaceuticals.

Stamet is a Gardena-based company developing a cleaner, more efficient way to burn coal. Scope also has an investment in Myricom Inc., a private Arcadia-based software company that claims to have been profitable since 1995. Luskin does not hold a seat on Myricom's board, though Robert Henigson, a 79-year-old Scope director, does.

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