Montgomery Growth Conference Notebook

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SAN FRANCISCO -- Notes from Monday's action at the

Montgomery Securities Growth Conference

.

Williams-Sonoma

(WSGC)

, the specialty retailer of house wares (think:

Martha Stewart

does

The Gap

), got battered Monday as reports of soft September same-store sales clipped 4 5/8 off the stock, which closed at 44 1/2.

A

Robertson Stephens

analyst touched off the trauma Monday morning with a report that stated same-store sales for the month were in negative territory.

Williams-Sonoma's presentation was fraught with anticipation for the break-out session, where analyst

Tom Courtney

, who tracks the stock for

Montgomery Securities

, promised the company would address the issue.

Too impatient to wait, investors cornered Courtney as he exited the main presentation, and shouted: "What's the word?"

"Everything's okay," Courtney shot back.

According to a money manager -- who attended the break-out session, which was closed to the press, and spoke on the condition of anonymity -- the same-store sales softness was exaggerated. W. Howard Lester, the company's chairman, who was not at the presentation, made a special appearance at the break-out and told investors that September sales are weaker than they were in August, but insisted they were not negative. He added that he was comfortable with analyst estimates for the current quarter.

On a day where investors were eyeing Williams-Sonoma with heightened scrutiny, it seems even fate worked against them. As a video about the new fall colors at the

Pottery Barn

division rolled, investors squirmed in their seats and began heading for the door in droves. Turns out that the video, which talks in detail about the richness of colors like pumpkin, was devoid of color itself. An audio-visual mishap rendered the merchandise bland and unappealing.

This is the 27th annual

Montgomery Securities

Investment Conference, and the biggest yet. Montgomery expected some 1,000 big money traders and fund managers at the show, and while final numbers were not yet in, Montgomery media relations manager

Jennifer Smith

says it looked like closer to 2,000 would be in attendance. The halls of the San Francisco Ritz Carlton are filled with people in business suits and Montgomery name tags. And so is each of the hotel bars, lobbies, cab stands, phone booths and elevators. Boyish fund managers can be overheard waiting for the elevators saying "I own 1% of that company and I had no idea..."

Two hundred thirty five companies are scheduled to present, companies with a combined market cap of $1.2 trillion, and average growth rate of 27.5% and a 1998 price-to-earnings ratio of 24.6. At Montgomery, it's all about growth stocks.

"The market for growth stocks has been surging since the spring, driven by strong, and in some cases, better-than-expected earnings," said

John Skeen

, Montgomery's Director of Research. "Considering that the Montgomery Securities Growth Stock Index is selling at only a 45% premium to the

S&P 500

when it's growing its earnings three times faster, we believe there is a strong probability of continued growth stock outperformance in the current market."

He'd better hope so. This massive show - and, presumably, Skeen's retirement -- is funded on the commissions generated from trading such growth stocks. Fund managers had to generate a reported $50,000 minimum in Montgomery commissions just to be invited to this show. So let's say 30 cents a share a commision, and an assumed average share price of 30 a share, that's about $5 million in Montgomery trades in a year.

Another hot topic was

Advanced Fibre

(AFCI)

.

Jane Snorek

, director of research at

Oberweis Asset Management

in North Aurora, Ill., said it was the most exciting presentation she'd seen all morning.

The company, which is carving a niche between the top tier companies like

Lucent

(LU)

of the world and the bottom tier firms like

Pairgain

(PAIR)

, is starting to put some substantial numbers behind the hype.

Snorek, who bought shares in the company's 1996 IPO but subsequently sold when the stock became too pricey, says she's considering buying again. "Their

earnings numbers are catching up to their multiple," she says.

What caught her attention during the presentation? "I was surprised by how many customers they had," she says, adding they number about 600 in 15 countries. And she was impressed by the inroads the company has made in the huge Chinese market.

Couple those nuggets with the announcement at the tail-end of the session that the company is shipping a new product this week, an off-shoot of its

3G Digital Loop Carrier

(DLC), and it's no wonder the stock jumped 4 1/4 to 74 3/4 Monday.

Daniel Lee

, head of investor relations for

Mirage Resorts

(MIR)

, did an admirable job of impersonating the fountains that will surround a man-made lake in front of the company's

Bellagio

resort, which should open close to schedule in Las Vegas by September 1998. Since the audio-visual equipment was on the blink, Lee was reduced to hand motions that showed how the fountains would shoot water into the air in time with music. (You know, like a laser light show.) One caveat: Some of the fountains are so powerful, shooting water 250 feet in the air, that they can only be used when the winds are calm. Otherwise, Lee said, they'd decimate the landscaping of nearby

Caesar's Palace

. That's one way to wash-out a competitor.

The Bellagio is one of the most lavish and expensive hotels ever built, Lee said. In keeping with that excess, it will have an art collection worth $130 million. The stroke of genius is that the masterpieces are for sale -- ensuring that at least some of the nightly winnings remain in the house.

As usual at these conferences, there seems to be a direct correlation between the glitz of a companies slide show and the stock's lousy performance. In the last year, shares of

WinStar Communications

(WCII)

have been dead and dying (despite Montgomery Securities analyst

William D. Vogel

calling it "My number one upside potential pick of all the companies I follow.") But their 8:30 a.m. PDT multimedia slide show was replete with fancy graphics of the buildings the company has wired in Manhattan to a giant TV broadcast of WinStar commercials worth of a Monday Night Football game (four giant, eight speaker audio monitors cranked the commercials to drown out the sounds of any complaining shareholders.).

Half an hour later,

L. Lowry Mays

, the distinguished Texan CEO of

Clear Channel Communications

(CCU) - Get Report

gave a presentation that was about as high tech as a sixth grade science teacher with an overhead projector. Black and white slides with simple text told the story of a tiny radio company that grew into a radio, television and outdoor advertising force that has been simply the best performing stock on the

New York Stock Exchange

over the last ten years. When Mays, the company's founder and largest shareholder, showed a slide with more than two colors the crowded meeting room actually burst out laughing at the ridiculously colored slide that looked like the Partridge Family bus rolling into an Abbott and Costello rerun. Guess the laughs are really on WinStar shareholders.

(Ed's note: Check out the site throughout the day for updates from the Montgomery Growth conference in San Francisco.)