AFG Enjoying Windows of Opportunity

AFG Industries has pocketed millions in the past two years by making daring investments in the stocks of other companies.

But its biggest investment--and its biggest payoff--may well turn out to be in its own expanded production in the otherwise staid flat-glass industry.

And that expansion could send AFG shares soaring, according to Larry Selwitz, a securities analyst with the investment firm of Bateman Eichler, Hill Richards.

In his latest research report on the Irvine-based company, Selwitz continues to recommend the purchase of AFG shares based on his projection of a 20% jump in earnings for 1987 and a 19% jump next year. That would bring net income to $38.5 million in 1987 and $45.8 million in 1988.

And that’s before considering any gains from securities trading--which could be substantial.

In 1986 the company earned $19 million from stock investments in Lear Siegler Inc. and $18 million from the purchase of shares in Merabank, a Phoenix-based commercial bank. Earlier this year AFG made a $25-million profit from investments in GenCorp common stock.

“We believe that AFG can be expected to continue its aggressive policy of buying the shares of other companies,” Selwitz said.

“AFG’s investment aggressiveness (is) primarily a means for raising capital to fund its rapid growth in glass manufacturing and distribution,” he said.

Sold Out Through 1988

In the past six years alone, AFG has invested more than $200 million to upgrade its facilities and increase output. Still, it has already sold out its entire 1987 and 1988 production and is now buying glass from other manufacturers for distribution.

Two new manufacturing facilities are scheduled to open in 1988--one in Victorville and one in Kansas City. They could add $100 million to annual sales.

That would bring total annual sales to more than $500 million.

AFG’s stock certainly reflects this growth. The company’s shares closed Friday on the New York Stock Exchange at $26.625, up 75 cents for the day and within $1 of the 52-week high of $27.625. The stock’s low for the year was $16.75.

At its current price, AFG common stock is trading at about 13.5 times earnings, way over the industry average of eight to 10 times earnings, Selwitz said.