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Delphi's Oracle Points To Amax

Inside Wall Street


Investment manager Scott Black has been busy buying recovery stocks--shares of companies he believes will zoom once the market is convinced that the economic rebound is real. One of his prime picks is Amax, the smallest of the nation's major aluminum producers.

Aluminum stocks aren't exactly gleaming. Analysts have been mostly down on them because of high inventories and low prices. But Black, president of Delphi Management, likes Amax not only for its potential as a recovery play but also because he thinks the stock, now at $23 a share, is cheap based on assets.

This year, revenues are expected to just match last year's $3.7 billion. But next year, as the recovery picks up steam, Black figures they should climb to at least $4 billion. He thinks earnings should hit $2.25 a share in 1992, vs. an estimated $1.40 this year. For 1993, Black foresees earnings of about $8 a share--back to 1988 levels.

He figures the company is worth about $40 a share based on earnings potential. But as an asset play, it's worth more. Here's how Black values Amax' operations: aluminum, $2.5 billion; coal, $1.1 billion; oil and gas, $661 million; gold, $378 million; other metals, $550 million. Total value: $5.1 billion. Subtracting debt of $1.4 billion puts the company's asset total at $3.7 billion--or $43 a share.

"No matter how you slice it," says Black, "Amax is worth a great deal more than what the market is valuing the stock."GENE G. MARCIAL

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