Excluding U.S. recessions, Hughes Supply stock has performed well, as evidenced by the attached chart. In the roughly seven-year stretch from the late 1990 trough to the early 1998 peak, the stock saw nearly a 30 percent compounded annual gain. The stock bottomed out this April around $13, and despite taking a big hit following the September 11 disaster, is still up double-digits for the year compared to a 24 percent decline in the S&P 500 year-to-date.

While the 91 percent run in the stock from early April to September 10 was remarkable, it is not unexplainable. Hughes' stock typically performs well coming out of economic downturns. Although many economic prognosticators still expect that the accommodative Fed will produce a recovery in 2002, we think something larger is driving the stock. Hughes has implemented some fundamental changes that we think are even more important in driving better results.

The run in Hughes' stock price began shortly after Tom Morgan was named president and COO. Not a chance coincidence, in our opinion. After meeting with Morgan it becomes clear that he understands distribution, has a good strategic plan for Hughes, and is a good listener.

Immediately after joining the company, Morgan started visiting branches. This is indicative of his fast-moving, straightforward, results-oriented management style, which will focus resources where the rubber meets the road — the branches.

To be sure, vendor consolidation, fleet program analysis and a unified IT system will drive better results, but programs are worth nothing unless there is buy-in where the company interfaces with the customer. After meeting with Tom Morgan, we believe he will get the necessary buy-in that will drive Hughes to higher levels of efficiency and profitability than we have seen in recent history.