---

from Outstanding Investor Digest's December 31, 1996 Edition

---

CENTURY MANAGEMENT'S
ARNOLD VAN DEN BERG

(continued from preceding page)

Van Den Berg: But I've seen this situation before - you know, where a company clearly has great products, but doesn't quite have it all together - and then they bring in a guy who can put the ribbon on the package and make it a very attractive gift. I think this guy from Honeywell has the potential to do just that.
The same thing happened at the other two companies that became our big winners...

OID: Only one war story per customer, if you please - or, at least, one winner...
Van Den Berg: Exactly the same thing happened at both companies we thought were just boring value plays. We bought Galileo at an average cost of $5. And it's selling for between $23 and $25 today. And we've sold a lot of our shares at that price. And another one was Maxwell Labs. There, our average cost was $8. And today it's at $42.
But if you'd told me that those two were going to be our big winners, I wouldn't have believed you - because they were just two boring companies that were selling below book value with good products, good technology and good things going on generally that weren't being reflected in their stock price.
But, in both cases, all of a sudden...

OID: "All of a sudden" is right: The gains in Galileo look like they all came in a one-year period. And the gains in Maxwell appear to have all come since April.
Van Den Berg: That's right. Maxwell brought in a new guy. And within six to nine months, he had their product line repackaged, one of their product lines just caught on, their sales went up and their earnings followed. So now we're realizing their value. And the same thing happened with Galileo.
However, they weren't bought as growth stocks, although they're being bought as growth stocks today. They were being bought as value stocks - just like Moore.

OID: You sound like FPA Paramount's Bill Sams.
Van Den Berg: In fact, when we started buying Galileo, it had a book value of $8. And our average cost basis is $5. When we started buying Maxwell Labs, it had a book value of $15. And we were buying it at $8.

OID: But aren't you paying more for Moore?
Van Den Berg: Only using stated book. Again, the adjusted book here is much higher for all of the reasons that I've already mentioned.
And one more parallel: One thing that we used to always hear people say about Maxwell Labs was that they had more PhDs per square foot than M.I.T. But they brought in a guy who did some marketing, some refocusing and so forth.
If Hurd turns out to be like this guy from Maxwell, then we could have a lot to look forward to in Moore, too.

OID: And the odds of that?
Van Den Berg: In all candor, I'm not suggesting that Moore Products will be a great winner or anything of the sort - because Galileo and Maxwell Labs were the two big winners out of 15 or 16 companies.
But they both had the same kind of factors present: Things weren't going well. They were a little bit sloppy, but they were good people. They produced good products. And they wanted to do a good job. They just needed somebody to refocus 'em.
And based on everything I can see, that seems to be exactly what's going on at Moore. There seems to be a slow, evolutionary process going on - partially from within the company and partially from Hurd - to bring the company into focus and to increase shareholder value. And, as that occurs, that increased shareholder value will eventually be recognized in their stock price.

OID: Interesting.
Van Den Berg: So we're beginning to get a hint of this new, more shareholder value-oriented thinking. And as they continue to evolve that way, I think the Street will recognize it, too.

OID: With a higher stock price.
Van Den Berg: Exactly. You wanted something selling at 50¢ on the $1. There's no question in my mind that this one fits the bill there. It's just a classic value.

OID: It sure sounds like it.
Van Den Berg: If you take their excess pension of $9.50 and their excess real estate of $2.50 per share and their LIFO reserve of $2.50, you have $14.50. And the stock's at $19. So for $4.50 per share, you can buy a company with $54 per share in sales, $3 per share in normalized earning power and a $20+ book.

OID: Thanks for the offer. But we're too busy to get involved in any LBO until we finish this edition.
But do you know where we could borrow $4.50?
Van Den Berg: I'm afraid not. And that's too bad because somebody could get themselves a real bargain - although, again, it won't happen on an unfriendly basis. But I think something's going to happen on their side.

OID: If you get an investment banking commission, do you think we could get a deferred advertising fee...
Van Den Berg: So there's a lot of things going on. But I don't need any of these other things to convince me that this is a great buy.

©Copyright 1996-2010 Outstanding Investor Digest, Inc. All rights reserved.
295 Greenwich St., Box 282, New York, NY 10007 (212) 925-3885