Multichannel Marketers Took Portfolio to New Levels in '04

The 45 percent increase in the value of the DM News Portfolio in 2004 comes as no surprise to Don Libey.

“I think that the direct marketing and catalog industry is finally benefiting from its significant jump-start in the online, multichannel marketing world,” said Libey, managing director of Libey-Concordia, Philadelphia, advisers and investment bankers to the catalog industry. “The catalogers got started early, had everything in place and [2004] is the year that we're seeing the payoff.”

The DM News Portfolio is based on $1,000 being invested in each of the 100 firms in the Portfolio at the start of the year, or when the stock first closed for newly public firms. Its value as of Jan. 5 was $144,544, up 44.54 percent versus 12 months ago.

“The valuations have begun to come up, and it's a big recovery from 2001, 2002 and 2003,” Libey said. “Another factor is that catalogers and multichannel marketers have a better return on investment than other types of commercial ventures. It's not unusual to see companies making 15 percent earnings before taxes. That's impressive compared to manufacturing businesses that might be doing 4 to 5 percent.”

Another reason is that large companies are paying premium prices for acquisitions. Libey cited Deluxe Corp.'s acquisition of business-to-business cataloger New England Business Service Inc. last year and Staples' purchase of Medical Arts Press.

“The 'bigs' need more 'bigs,' and they are willing to pay more,” he said, “and, therefore, their value increases. Medical Arts Press was in excess of 15 times earnings. That's huge, and that's an aberration, but it's indicative of the value catalogs have.”

Also in the mix is the considerable amount of “private equity fund money looking to get into cataloging since it's a safe, predictable, formulaic business which is already multichannel and having a higher return on investment than almost anything else and less risk,” he said. “When it comes to buying a business, you can't beat a catalog.”

In 2005, more companies will realize the importance of multichannel catalog marketing, and the interest in buying catalogs will continue, Libey predicted.

Big winners in 2004, as measured between Dec. 29, 2003, and Jan. 4, 2005, included:

· Vermont Teddy Bear, from $4.26 to $6.37.

· Checkfree Corp., from $27.93 to $36.10.

· Guitar Center, from $32.92 to $52.38.

· infoUSA, from $7.90 to $10.69.

· Marlton Technologies, from 50 cents to 90 cents.

· Metris Companies, from $4.36 to $12.

· Sportsman's Guide, from $17.70 to $22.34.

· West Corp., from $23.45 to $33.49.

· Zones Inc., from $1.57 to $6.20.

In other news, FAO Inc. was delisted and removed from the Portfolio. Also removed was Hanover Direct Inc. Replacing them are Digitas Inc. and WPP Group PLC.

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