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Debt Free, Cash Rich New Jersey Steel

Inside Wall Street


Remember the infrastructure plays that were supposed to hit the skies once the Clinton Administration's program of rebuilding roads and bridges got off the ground? Most investors have tired of waiting for the Clinton plan and have quietly dumped the infrastructure idea. That's one reason why New Jersey Steel has been on the ropes. Moreover, the Sayreville (N.J.) company, which operates a low-cost minimill that recycles scrap into reinforcing steel bars, posted a 20 -a-share loss in the first quarter vs. earnings of 7 a year ago.

But as the stock has melted to 14 from 18 in early March, some value players have snapped it up--including portfolio manager Scott Black, who has accumulated some 4%. Here's why Black likes the stock:

New Jersey Steel has a clean balance sheet and almost no debt, with the stock trading at about book value--$15 a share. The company also has some $8 million in cash, or $1.50 a share. That's not all. Black, president of Delphi Management, sees the 25 -a-share earnings he expects this year jumping to $1.50 in the year ending Nov. 30, 1994, and to $3 in 1995.

Black notes that a rise in scrap prices crimped the company's first-quarter results. But he sees those prices abating soon, and with New Jersey Steel continuing to raise the price of its reinforcing bars, Black figures earnings will propel the stock to 30 in two years. The recent U.S. International Trade Commission ruling that imports don't injure domestic steel producers has no effect on New Jersey Steel, says Black, because its reinforcing steel doesn't compete with imports.GENE G. MARCIAL

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