By DANIEL TAUB

Staff Reporter

Investors, it seems, are finally going for the gold.

Burbank-based OroAmerica Inc., the largest manufacturer and distributor of gold jewelry in the nation, has seen its stock more than double in the last five months, going from less than $5 in January to $11.06 last week.

Volume also is way up. In a single day following the company’s April 8 report of its fourth-quarter earnings, more than 650,000 shares were traded, compared with an average of less than 40,000 shares through early April.

And little wonder. The report showed that OroAmerica’s fourth-quarter net income shot up to $3.5 million, compared with $926,000 for the like period a year ago.

“The company’s finally getting recognition from institutional investors,” said Andrew Scott, senior director of Jersey City, N.J.-based M.H. Meyerson & Co. Inc., which rates OroAmerica a strong buy. “The company, I believe, is significantly undervalued.”

Shiu Shao, OroAmerica’s chief financial officer, said the high level of trading, as well as the rise in share price, are the result of a strong year-end report and a concerted marketing effort to make investors more aware of the company’s performance.

For the year ended Jan. 30, OroAmerica reported net income of $6.7 million ($1.06 diluted earnings per share), vs. $2.2 million (35 cents a share) a year earlier a threefold increase.

“After our release of the fiscal-year ’98 results, there were so many people who found out this was an undervalued company, and they called us,” Shao said.

OroAmerica, which was founded in 1977 by Guy Benhamou, the chairman, president and chief executive, makes and distributes gold and silver jewelry, including earrings, chain necklaces, bracelets, rings, charms and pendants. Its plant in Burbank makes some of its jewelry from semi-finished materials, gold bullion and other raw material. It also has plants in South America, the Caribbean and Indonesia.

The jewelry sells in mass merchandise stores such as Wal-Mart OroAmerica’s largest single customer, accounting for 18 percent of the company’s sales Kmart and JC Penney, and on the QVC television network.

OroAmerica has managed to keep its earnings on the rise even though its net sales actually dropped to $159.7 million last year, from $177.1 million in 1996. That’s because it cut back on the number of generic, less-profitable products, and increased the number of products with a higher profit margin.

“We weeded out all those unprofitable product lines basic products, like a basic rope chain,” Shao said. “But we introduced a new rope chain with a patent protection, a copyright protection. And with the demand for those chains, there’s a much higher profit margin.”

Pete Castellanos, an analyst with Irvine-based Cruttenden Roth Inc., which also rates OroAmerica a strong buy, said the decision to focus on patented products has helped the company’s bottom line.

“They are more focused on a higher-margin product,” he said. “They made a decision a couple years ago to develop a higher-margin product more emphasis on trademark, brand name, design.”

OroAmerica, trying to increase its market share from the current 3 percent level, has been on an acquisition streak in the last year. In August 1997, it purchased in-house inventory and customer accounts from Clearwater, Fla.-based gold jewelry manufacturer Ravel Inc. In October, it purchased San Diego-based Jerry Prince Inc., a gold and silver jewelry manufacturer and distributor with annual sales of $14 million. More acquisitions are expected.

“I think that’s going to be a big factor in their growth,” Castellanos said.

Both Castellanos and Scott of M.H. Meyerson expect OroAmerica to outperform the market over the next year. Castellanos gives OroAmerica a 12-month target price of $21 a share, and Scott gives it a 12-month target of $20 a share.

Meanwhile, OroAmerica is trying to diversify outside the jewelry business by selling cigars. In February, it began distributing its first line of stogies, which it produces at its own factory in the Dominican Republic, to independent cigar stores. In the next month, it plans to open its first company-owned cigar store on Rodeo Drive in Beverly Hills.

While analysts don’t expect the foray into cigars to hurt OroAmerica’s bottom line, they don’t expect it to be as fruitful for the company as its core jewelry business.

“I don’t expect it to be a significant contributor of revenues,” Scott said. “I think it will be very successful, but it’s not the company’s focus.”