JANNA SAMPSON
PORTFOLIO MANAGER
OAKBROOK INVESTMENTS

STOCK: Pitney Bowes Incorporated
SYMBOL: (NYSE: PBI)
PRICE: $43.50 (as of 4 p.m. yesterday)
52-WEEK RANGE: $40.34-$47.50
MARKET CAPITALIZATION: $9.92 billion

Janna Sampson is a portfolio manager with Illinois-based Oakbrook Investments. Pitney Bowes is an integrated mail- and document-management-services company catering to corporate clients worldwide. PBI stock hasn’t done much in recent years, but as Ms. Sampson explains to David Dalley of The New York Sun, that might be about to change.

What exactly does Pitney Bowes do?

They’re in the mail management business. Among other things they’re the principal maker of postage meters [machines used to print postage stamps onto envelopes as an alternative to paper stamps]. They have 95% of the U.S. market and a 60% share worldwide. They also own virtually all the encryption patterns [codes used to protect the authenticity of a self-printed postage stamps] used by U.S. post for doing any kind of mailing whether it’s done using the meter or via the Internet [i.e. printing out postage stamps online].

Why is it a good investment?

When we look for investments, we try to find big market share companies. We want the business to have what an economist would call market power – a large share of the market (and in this case PBI has almost no competitors) – and power to protect that share (for example a legal barrier, like rights to the encryption codes). Then on top of that, PBI has a very strong balance sheet, a consistently strong cash flow, and an above average dividend yield. Typically a company with a strong balance sheet and all the rest trades at a premium to the market on a P/E basis. This one’s trading at a discount. That’s what we look for – that and market power.

Why now?

Well, they’ve spent a lot of time reshaping the company over the last five or so years. They sold off a lot of ancillary businesses – like copy machines and aircraft leasing – things that weren’t related to their core business. They’ve become like an integrated mail-management company, and they have a better sense of what they’re trying to do.

They’ve also just inked a deal with eBay in the last 12 months [to handle package management and to use PBI software on eBay servers], and we’re starting to see that contribute directly to the bottom line. We’re expecting it to go from stodgy single digit growth to double digit. It’s trading on a P/E of about 16 – that makes it very reasonably valued. This is a classic case of “buy in cheap.”

What are the risks?

It’s a bit of a forgotten company – it’s been thought of as an old line stodgy company – but it’s kind of remade itself over the last few years, and the market hasn’t woken up to that. It isn’t on many radar screens, so the risk, I guess, is in waiting for everything it’s done to pay off and for people to start taking notice. Getting the message out is what’s important right now.