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Wall Street,California | STOCK EXCHANGE

Track Owner Isn't So Racy; Public Storage Holds Little Appeal

Stock Exchange lets readers listen in as Times staff writers James Peltz and Michael Hiltzik debate merits of individual stocks.

May 16, 2000|JAMES PELTZ and MICHAEL HILTZIK

International Speedway (ISCA)

Jim: Don't buy

Mike: Buy

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Mike: Our first stock today, Jim, is International Speedway, which I believe must be one of your personal favorites.

Jim: The sport is one of my personal favorites.

Mike: And the sport of course is NASCAR, which is to say, stock-car racing.

Jim: That's right.

Mike: Now, does it mean anything that when I turn on the TV today, the guy I see hawking all those cheesy, cruddy products that Michael Jordan used to shill for is now Jeff Gordon?

For the Record
Los Angeles Times Tuesday June 13, 2000 Home Edition Business Part C Page 7 Financial Desk 4 inches; 109 words Type of Material: Correction
Public Storage (PSA)
Jim: By the way, Mike, we should clarify a couple of points we made about Public Storage back on May 16.
Mike: Right. We remarked then that PSA's co-founder, B. Wayne Hughes, takes management fees from the company. In fact he hasn't done so since 1995, when he merged together several companies he controlled, including the company that paid those fees and the company that received them--though today, as PSA's filings with the government disclose, he and members of his family still do business with PSA as private investors and businessmen. We also suggested that PSA has done worse than REITs in general; in fact it turns out PSA stock has pretty much tracked the REIT sector, which as we said has not done well in the last couple of years relative to the broad market.

Jim: Actually, yes. Therein lies one of the reasons that illustrates why NASCAR is so popular today.

Mike: Jeff Gordon being one of the young, good-looking champs of the circuit . . .

Jim: Wait a minute. We're not here to discuss Jeff Gordon. Although he's an integral part of what we're gonna talk about. But in the interest of full disclosure, I am indeed a big NASCAR fan, have been for many, many years.

But here again is a classic example of how there can be a big difference between liking a company--or in this case a sport--and liking its stock.

Mike: You wouldn't buy this stock?

Jim: I do not like this stock.

Mike: You're kidding me!

Jim: I am not kidding you.

Mike: And I was all set to be straining uphill on this one, like a diesel truck.

Jim: No, I would definitely hit the brakes on this stock, so to speak.

Mike: I'm stunned.

Jim: Let me explain. First, there's no question that this is an enormously popular sport. I have watched it expand from its Southern roots, when it definitely was a redneck, beer-swilling sport, to what is now, a national pastime.

Mike: Sure, it's moved upscale from, what, East Rabbithash to Hollywood and New York.

Jim: Absolutely. It's no coincidence that the championship award is held each year at the Waldorf Astoria in New York.

Mike: Where I understand they install spittoons in the ballroom and put possum on the menu.

Jim: Stop that!

Mike: I merely thought we should get the stereotypes over with in a hurry.

Jim: Forget the stereotypes. This sport has passed every other sport except pro football in popularity, as measured by live attendance at events, television ratings and sponsorship.

Mike: Sure, and Fox, TBS and NBC aren't fools. They've ponied up $2.4 billion to broadcast NASCAR races on the weekends starting in 2001.

Jim: That gave International Speedway stock a big run, which brings us back to a company that happens to be one of the biggest players in the sport, because what it owns are some of the most popular tracks on which these races are run. That includes Daytona and Talladega and even the California Speedway in Fontana, which it acquired not long ago when it bought Penske Motorsports.

Mike: Isn't it fair to say that International Speedway in a very real sense is NASCAR: After all, they're controlled by the same family, the France family.

Jim: You've hit on something that I'm not too wild about, which is that the Frances control both. Of course, the family maintains that it keeps an arms-length relationship between the sport and the company, and investors seem to agree.

Mike: Well, the family owns only 40% of International Speedway.

Jim: Oh, is that all? So they probably don't have any say about how it's run, right?

Mike: Very funny.

Jim: Here's my problem. International Speedway has got some of the premier tracks in a thriving sport that has everything going for it.

Mike: And appealing stars who drive billboards on wheels around circular tracks, and who always are facing the danger inherent in the sport.

Jim: As we saw last week, when the youngest member of the famed Petty racing family was killed in practice. There's no getting around it: Part of the sport's allure is the ever-present risk involved.

Mike: Look, as a business this sport is more or less a closed book to me. But I see numbers that are huge, so what's your problem with ISCA?

Jim: International Speedway at the moment has everything going for it. Yet I see a stock that has been stuck in low gear for more than a year. If you have held this stock for the past 12 months, you're down 21%. You'd have been better off putting your cash in the glove compartment of your own car.

Mike: But what about the future?

Jim: ISCA is a well-run operation. It's generating nice profit gains from higher attendance and it has good cost controls. But it's still selling for 40 times its expected earnings this year and I think that leaves almost no room for this company to do anything wrong.

Mike: This year International Speedway will run 20 major weekend events. Admission revenues rose this year by 10% per event weekend. They've got their mitts on all the other ancillary stuff like souvenirs and concessions and all that. Food, beverage and souvenir revenue for International Speedway is up 60% year-to-year. So what happens when the stock actually starts catching up to the fundamentals?

Jim: I don't think it will. A 40 P/E for this stock would make even poker-faced Dale Earnhardt blanch.

Mike: Yeah. . . . Whoever she is.

Public Storage (PSA)

Jim: Don't buy

Mike: Don't buy

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