Ahmanson stock remains 'most attractive' purchase, brokerage house report advises.

Ahmanson stock remains `most attractive' purchase, brokerage house report advises

The stock of Los Angeles-based thrift H.F. Ahmanson "remains one of the most attractive [stocks] of the major California S&Ls," advised Bear, Stearns & Co., the New York-based brokerage house, in a recent investment advisory report.

Trading at $18 a share - off from a 52-week high of $25 - H.F. Ahmanson stock "is attractive as a result of the low current evaluation which fails to adequately reflect the company's earnings prospects and overstates the credit risk to which this residential mortgage lender is exposed," said Bear, Stearns.

Ahmanson, a big thrift with $50.2 billion in assets, has a good quality portfolio of loans, said Bear, Stearns. "Unlike many other financial institutions, Ahmanson focuses almost exclusively on residential mortgage lending. While the company did make commercial and industrial real estate loans in the past, it stopped such loans in 1988. As a result, Ahmanson's asset quality has remained fairly stable, while other companies' have declined," said Bear, Stearns.

Thus Ahmanson does not have a large volume of loans outstanding on oil wells or other risky commercial ventures that have savaged thrifts nationwide, but particularly in Texas. Additionally, much of Ahmanson's portfolio is made up of adjustable-rate mortgages. Thus, if interest rates go up, so does Ahmanson interest income.

Ahmanson should post earnings per share of $2.75 in 1990, meaning the company is trading for a low price-earnings ration of 6.5 times expected earnings, said Bear, Stearns. (A price-earnings ratio, or p-e ratio, is the price of a company's stock dividend by earnings per share. A $10 stock with earnings of $2 per share trades for a p-e ratio of five. The overall stock market, as measured by the S&P 500, is trading for a p-e of about 12).