Inside Wall Street
BIG YIELDS FROM A FARMER'S FRIEND?
What $5-a-share stock is catching the eye of such big value investors as Mario Gabelli and Odyssey Partners? Two clues: It just moved its headquarters from New York to Sioux City, Iowa, and it is neither tiny nor unknown but trades on the Big Board. Give up? It's Inspiration Resources, which sold its metals operations, Hudson Bay Mining & Smelting, last year and will soon change its name to Terra Industries.
The company, which had revenues of more than $1 billion last year, is a niche player in the farm belt: It provides farmers with crop production and protection products, including fertilizer and seed, as well as support services.
"Inspiration is the best way to play the agricultural growth game," says one big investor. As the economy improves, so could farming activity, he says. Some 95% of Inspiration's sales comes from its Terra division.
This pro believes that as earnings improve over the next 12 months, the stock could double. Operating earnings increased to 27 cents a share last year from a loss of 52 cents in 1990. Earnings should rise to 35 cents this year and to 40 cents next year, says the investor, as the company benefits from increased corn planting. Earnings will also be helped by low natural-gas prices--an important factor in making nitrogen fertilizer--that should keep costs down.
That's not all. Inspiration is 56% owned by Minorco, a Luxembourg-based company with major interests in mining and metals processing. One major investor believes Minorco will ultimately sell Inspiration substantially above its $5-a-share price.GENE G. MARCIAL