A.I.M. Value Line Stocks

[OldAIMGuy]

A NEW PIC Stock for the portfolio.

Helen of Troy (Toiletries & Cosmetics) joins the PIC list with a Timeliness of "5", lowest in Value Line while still being listed on their "Highest Growth Stocks" list. It reached a cyclical high in 1998 at $26 and a low in 2000 of $4. It then recovered to a new cyclical high of $37+ in 2004. Value Line mentioned that this entire sector is currently "out of favor" with low Timeliness ranking. Sounds like a great time to be considering it for AIM management.



Value Line Info
BETA = 0.95 (unexciting)
Stock's Price Stability = "30" (acceptable)
52 Week Hi/Low = $37.36/$21.53

BUSINESS: Helen of Troy Ltd. designs, develops, and markets hair dryers, curling irons, combs and brushes, hair accessories, and foot care products primarily in North America. The Consumer Products Divison distributes Vidal Sassoon, Revlon, Sable, Sunbeam, Dazey, and Dr. Scholl's brands to retailers. The Professional Salon Divison markets products under Helen of Troy, Hot Tools, Salon Edition, and Gallery Series labels to beauty/barber industry. Home Health Care Divison sells products under Dr. Scholl's brand name. Acquired OXO Int'l., 6/04. Has 681 emplys. Off. and dir. own 24.2% of stock; Columbia Wanger Asset Mgnt., 6.8%; (6/04 Proxy). Chairman & CEO: Gerald J. Rubin. Addr.: One Helen of Troy Plaza, El Paso, TX 79912. Tel.: [phone]. Internet: www.hotus.com.
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Helen of Troy likely finished off fiscal 2004 (ended February 28th, 2005) with a rather lackluster 10% year-over-year share-net advance. Late in the fourth quarter, the company lowered its sales and earnings expectations for the final period of the year, due to softer-than-expected Christmas sales across many categories of merchandise. This, in turn, resulted in lower sales by HELE to certain retailers in late January and early February, as customers pared their overall inventory levels. As such, we now look for the company to post fiscal 2004 earnings of about $2.40 a share, down from our earlier estimate of $2.60, on a 21% sales advance.

Prospects for the current fiscal year are considerably brighter. Indeed, sales in the latter part of February returned to prior expected levels, and we do not look for HELE's fourth-quarter sales difficulties to have any long-term impact on sales. Moreover, Helen of Troy is poised to roll out roughly 85 new products at the International Home and Housewares Show in Chicago, which augurs well for the company's prospects in fiscal 2005. Finally, the recent acquisition of OXO International, a producer of consumer product tools in several categories, should significantly bolster the company's top-line performance. As such, we remain comfortable with our fiscal 2005 $2.90 share-net estimate.

A lean cost structure is key to Helen of Troy's long-term prospects. A large percentage of the company's goods are manufactured by foreign subcontractors in China and Asia, and then shipped to large discount chains in the United States, such as Kmart, Target, and Wal-Mart. These retailers typically prefer ordering from a few suppliers, giving HELE greater market penetration. In addition, the company has proven to be particularly adept at lifting its bottom line through the use of licensing agreements to use trademark brand names.

Helen of Troy stock is an unappealing selection for the year ahead. However, investors with a longer-term perspective should take a look, as the issue offers alluring appreciation potential through 2008-2010, thanks, in large part, to the double-digit top- and bottom-line improvements we look for over that period.

Kenneth A. Nugent April 1, 2005
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Insider buying in Feb., 2005
Long Term Debt as % of Cap structure = 42%


HELE starts in the portfolio at last week's Monday open price of $23.72 with a 55% allocation of the $10,000 to the stock and 45% held in Cash Reserve.

PIC List Updates to come soon.

Best regards, Tom