Interstate's crash.

• Position: Interstate/Johnson Lane Inc. - On the Market

Interstate's crash

Let's be honest. Nobody minds buying seconds if you are talking sheets or towels. Who really notices, except maybe a busybody mother-in-law?

But when it comes to stocks and bonds, everybody wants first-quality. Investors are looking for something special: mushrooming growth, steadily increasing dividends or an about-to-be-discovered undervalued asset.

None of those descriptions fit Interstate/Johnson Lane (IS-NYSE). That's why few investors have had much interest in the Charlotte-based securities brokerage, even with its stock trading around $3.50, an all-time low (and barely 50 percent of book value). Even when the price shot up 75 cents just after CEO Craig Redwine -- the man many blame for its troubles -- departed, Interstate was a down-and-out stock in a tough market in late August.

Of course, that's one reason why some analysts and investors are asking themselves whether it's time to once again buy Interstate shares, or at least start sniffing around.

"At its current price, it's getting pretty down there," says Perrin Long, one of the few New York analysts who cover the securities industry.

He isn't ready to recommend purchase. He's watched Interstate struggle to carry out its 1988 merger with Savannah, Ga.-based Johnson, Lane, Space, Smith & Co. and cut costs in the face of an increasingly volatile market.

"I think we are at the point today where you really have to question whether present management has the ability to turn Interstate around," Long said a few weeks before Redwine resigned. Redwine's position will be left vacant temporarily, while former chairman Parks Dalton and COO Al Vernier run the company.

If there are signs that management can restore profitability, then Long might reconsider.

Questions about Interstate's future have arisen because the company has lost money seven of the past 11 quarters. In fiscal 1988, tax refunds turned a $1.2 million loss for the year into a $42,866 profit. In fiscal 1989, tax refunds reduced Interstate's losses from $4.9 million to $3.2 million. Through the first nine months of this fiscal year, Interstate lost $3.6 million, or 53 cents per share. The current fiscal year ended Sept. 30, but fourth-quarter numbers won't be out until mid-November.

Back in the early 1980s, Interstate was a money machine, earning as much as $12.4 million before taxes in 1983. Between 1981 and 1987, it had just one bad year, 1984. Even then, tax refunds provided a profit.

Its performance was...