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Tough Times? Yippee!

Inside Wall Street


During periods of economic distress, investors invariably clamor for recession-proof plays. Jack Laporte, president of the T. Rowe Price Horizon Fund, believes that he has found a real gem--a stock that isn't just recession-proof but actually benefits from economic slumps: Payco American.

Payco is a little-known collection agency that operates nationwide through 37 offices that are equipped with a computer-aided collection system. Not surprisingly, savvy investors such as Laporte have been scooping up Payco shares, which have climbed since early November from 9 1/2 to 12. He expects the stock to hit 20 in the next 12 to 18 months.

Laporte notes that as the number of unpaid bills increases, Payco's business expands. "Payco is one of the few pure plays in the recession," says Laporte. He estimates that earnings will leap to 70~ a share in 1991 from an estimated 55~ last year and 41~ in 1989. Revenues are also expected to soar--to $120 million to $125 million in 1991 from an estimated $107 million in 1990 and $95.7 million in 1989. Payco has "extraordinarily strong cash flow," says Laporte, which he estimates will grow to $2 a share in 1991 from $1.50 in 1990. Because the company's share of the debt-collection business is on the rise, Laporte believes that Payco should be attractive to one of the big financial companies and may soon become a takeover target.GENE G. MARCIAL

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