Hooker getting stock story out to investor community
By Larry Thomas -- Furniture Today, March 1, 2004
MARTINSVILLE, Va. — MARTINSVILLE, Va. — Hooker Furniture's stock rose 119% in 2003, making it the top performer among publicly held furniture manufacturers. But until recently, buying a share of stock in the 80-year-old company required healthy doses of patience and perseverance.
Shares were held primarily by a few dozen members of the Hooker family, their relatives, friends and business associates in the Martinsville area. On those rare occasions when some shares did change hands, the share price was posted at a local brokerage office — sometimes on a chalkboard.
"The shares were traded by appointment," said Paul Toms Jr., the company's chairman and CEO. "It was a great stock, but you couldn't get it."
Today, an investor simply makes a phone call or posts an online order to a brokerage firm to buy Hooker shares, and an average of 41,475 shares changed hands each day during the company's fiscal year that ended Nov. 30.
It wasn't that Hooker suddenly starting performing well — the company's only red-ink year was during the Great Depression — it's just that few people outside the furniture industry had ever heard of the company.
"We weren't getting the multiples (of earnings per share to share price) that our competitors were getting in the marketplace," said Toms, "So we felt it was important to tell our story to the investment community. We have a good story to tell."
In recent months, Hooker's stock has been mentioned favorably in The Washington Post, Bloomberg Financial Services and the popular investment Web site Motley Fool, where it was cited in a "Hidden Gems" column. And it also was added last year to the list of 159 "shadow stocks" tracked by the American Institute of Individual Investors.
But it wasn't always popular. The process of getting the company on investors' radar screens began slowly in 1999 after the number of shareholders grew larger than 500, triggering a requirement to register the stock with the Securities and Exchange Commission.
After Toms was promoted to CEO in December 2000, he and Chief Financial Officer Larry Ryder began courting securities analysts who cover furniture industry stocks. Eventually, they developed a PowerPoint presentation to take on the road.
Slowly but surely, daily trading volume began to increase. It became clear the company's message was getting out.
"It was trading at a ridiculously low valuation … and investors started to recognize that," said Keith Hughes, an analyst who follows the company for Atlanta-based SunTrust Robinson Humphrey.
Hooker's first big break came in June 2002, when the company's shares began trading on the NASDAQ small-capitalization market. Hughes' firm joined BB&T Capital Markets and Raymond James and Associates in sponsoring the move, promising to be a market-maker in the stock.
And then in May 2003, Hooker was added to the Russell 2000, an index of small-cap companies often used as a benchmark for mutual funds and other institutional investors who specialize in small-cap stocks.
"The index may not lead to immediate stock appreciation, but it lends additional credibility to a company," said Todd Schwartzman, an equity analyst at Sidoti & Co. who also follows Hooker. "It could lead some institutions who hadn't followed the company to take a look at it."
Schwartzman, Hughes and Joel Havard of BB&T all began covering Hooker last year, and Toms and Ryder are now regulars at conferences sponsored by the firms.
They've also taken their "road show" to a number of other investment firms in the past year, including several outside the Southeast, in hopes of getting the company on more investment radar screens. And they're leaning toward starting to hold quarterly conference calls with analysts — the primary way many larger companies communicate with the investment community.
"We want to be a more transparent company," said Toms. "We always try to err on the side of giving too much information."
Toms said the increased visibility — and the subsequent stock price appreciation — benefits Hooker employees, who own about 30% of shares through an Employee Stock Ownership Plan.
"Employees need to know what's going on in our business," he said. "The ESOP keeps all employees focused on the financial performance of the company."
The downside to a higher profile, of course, is that it opens up the company to more criticism.
A Motley Fool columnist, for example, recently questioned why Hooker signed the antidumping petition against producers of Chinese bedroom furniture when the company is an importer itself. (The company has since withdrawn from the group pushing the petition.)
And Hughes recently downgraded the stock to "equal weight" from "overweight" because he has concerns the company's inventory levels are too high.
But Toms and Ryder say they take the barbs in stride, because they believe the positives of analyst coverage far outweigh the negatives for Hooker stock.
"For a couple of years, we had to nudge it along a bit," Ryder said. "But now we have a good investor base, and we're trading at good multiples."
