Resolute On Ltv

Who's afraid of the cyclicals? Certainly not investment manager Steve Leeb. In spite of the Street's continuing skittishness toward steel producers, carmakers, and others whose fortunes are tied to the economy's swings, Leeb remains bullish.

"Valuations in these sectors are so low that it seems like investors are expecting an economic calamity," says Leeb, editor of Personal Finance in Alexandria, Va. But since he's convinced the economy isn't in any danger of swooning into a recession, Leeb has been buying heavily into cyclicals.

Among them is LTV (LTV), which emerged from Chapter 11 in 1993 after reorganizing and paying off $6 billion in creditor claims and $3 billion in pension liabilities. LTV has since become the second-largest supplier of flat-rolled steel to the auto, appliance, and electrical-equipment industries. LTV also supplies equipment to the oil industry.

Why pick LTV? Leeb expects steel prices to jump worldwide because of increasing demand in Europe, Asia, and Latin America. The enhanced demand could result in LTV earnings of more than $4 a share in 1996 and in excess of $5 in 1997, up from an estimated $2.50 this year, he says.

The stock, now at 15, is very cheap, maintains Leeb: It trades at less than twice the estimated 1996 cash flow of $7.50 a share, and less than three times projected 1997 earnings.

As a low-cost domestic producer, LTV is well positioned to weather any tough times ahead--should they come around again, notes Leeb. Over the next two years, he sees the steelmakers' stock climbing to 35.

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