ARE CAUTION FLAGS BEING WAVED ON AUTO-RACING STOCKS?
After a "thrill-a-minute start" Int'l Speedway (ISC)
and Speedway Motorsports (SMC), two of the largest owners of
stock-car racetracks, "are slowing down," causing fans on
Wall Street "to start waving the caution flag about the two
stocks," according to Tippett & Brooks of the WALL STREET
JOURNAL FL edition. Shares of SMC and ISC reached highs of
$31 and $25-a-share, respectively, but both have been "stuck
in the slow lane lately." Tippett & Brooks added that it
isn't so much that "growth hasn't materialized," but that
"it doesn't seem to be coming fast enough to justify higher
multiples." Gerard Klauer Mattison's Stuart Linde "fears"
that ISC and SMC may build "Taj Mahal" tracks that will cost
"at least" $100M apiece. He adds there "aren't enough big,
high-attendance races to go around yet," and "recommends"
purchasing smaller operators, like Dover Downs Ent., which
are "likely to spend much less and generate higher returns
on investment by acquiring existing tracks." In addition,
some money managers feel the stock-car sector's appeal has
"already faded." Wasatch Advisors Portfolio Manager Jeff
Cardon said track operators can't grow fast enough to
justify multiples approaching 30 times projected '97
earnings, and added that there is a "finite" market for
NASCAR's "brand of racing" (WALL STREET JOURNAL, 9/17).