When Sue and Bill Kiser bought two Arabian mares for their daughter, they never expected the girl's love of horses to lead them into a sizable tax-advantaged investment, let alone into a second family business.

The first family business was, and still is, Irotas Manufacturing Corp., a maker of rotogravure printing cylinders, in Shelbyville, Ky. A machinist, Bill Kiser founded Irotas in 1970 with $2,000 borrowed from his father, who was a coal miner. The company grossed only $44,000 that first year, and didn't show a profit until 1973. To get by, Bill held down a second full-time job as general foreman for another company, and Sue put in 16-hour days balancing Irotas's books, writing the payroll, and delivering the steel printing cylinders in a two-ton flatbed truck.

When the company did succeed -- today Irotas boasts three plants, 80 employees, and 1984 sales of $6.5 million -- the Kisers found themselves with a happier kind of problem. In a 50% tax bracket, they felt as if any profit they made "went straight to the government." So, they began looking for shelter.

Despite the couple's Kentucky up-bringing, horses were an unlikely investment. Sue was afraid of the animals, and Bill had a traditional, backcountry view of them: "Where I come from, if you pay $200 for a horse, he better work hard." Their daughter, Pam, however, had loved horses "since she was knee-high to a duck," as Bill puts it, and when Sue attended the U.S. National Horse Show in Louisville in 1980, she was struck by the grace and beauty of the Arabian breed. Soon after that, the Kisers bought Pam two Arabian mares. And soon after that, a man looking at the two mares told Sue that he could sell Arabian foals for $20,000 each.

Almost unknowingly, the Kisers had bought into one of the hottest investments around. Five years ago, only 62,000 Americans owned Arabians; now the number is upward of 100,000. Fifteen years ago, a typical price for a top-quality registered Arabian yearling was $12,000; today, the figure is estimated at an average of $125,000. The chance for price appreciation, moreover, is complemented by the horses' tax advantages. Animals younger than 12 years old can be depreciated over five years: 15% the first year, 22% the second, and 21% for each of the next three years. Those older than 12 can be depreciated over three years. After 24 months, profit from the sale of a horse used for breeding or sport gets favored long-term capital-gains tax treatment.

Taken by such prospects, Sue Kiser told her husband that she wanted to get into the horse business. He agreed, and she bought 11 brood mares sight unseen from Jerry Wight of Lasma Corp., generally considered to be a top Arabian breeder. Sue won't reveal the price she paid, but the terms were attractive: 20% down, semiannual payments on the balance over four years, and a five-year money-back guarantee if the Kisers decided to back out. There was even a sweetener to the deal: Three of the mares had foals by their sides and the rest were pregnant. Last year, the Kisers sold a yearling from one of the 11 mares for $61,000; in February, they sold another mare for $105,000. Already, they estimate their profit at around 25%.

"Horses are one of the few investments that create [another] investment with their foals, and that appreciates while you depreciate its value," Bill Kiser says. And in addition to depreciation, all expenses that are incurred in a breeding or training operation are tax deductible.

The tax-sheltered investment in 11 brood mares evolved into a bona fide business when the Kisers discovered that Lasma was selling parcels in a new development at its Louisville facility, called L'Esprit. L'Esprit covers 5,300 acres and will have 70 Arabian breeding farms; some of the farms, Lasma's planners figured, could go into business boarding mares that were brought by their owners to breed with Lasma's multimillion-dollar studs. On Sue's birthday in 1983, Bill Kiser presented her with 40 acres of land to add to the 25 on which they had palnned to build Fairlight Valley Arabians, which would be a boarding farm.

The Kisers promised Lasma that they would have their stalls open the following March. Sue oversaw the project from an on-site motor home, and working on a tight schedule, opened 30 stalls on March 3, 1984. As the stalls were built, they filled up with horses that belonged to investors from all over the country, and the stable has been booked solid ever since. The finishing touches were completed, Sue recalls, at 4:00 p.m. on July 12, 1984, when the Kisers celebrated with a sitdown dinner for 1,000.

Today, Sue's "hotel" is home to some of the most expensive horseflesh in the country. Residents include the horses of Armand Hammer of Occidental Petroleum Inc., and Gilbert Van Kamp, formerly of Van Kamp Inc., the frank-and-beans company. Sue is also trying to convince entertainer Wayne Newton, whom she met backstage at a recent performance, to board some of his Arabian mares at her farm. The mares that Armand Hammer boards at Fairlight Valley have an average value of $350,000, and another client's horses are worth more than $1 million each.

As with other collectibles, there is no promise that the market for Arabians will continue to rise. Horseracing in the United States is dominated by thoroughbreds, and while Arabian racing is popular in Europe, the sport is in its infancy here. But although the breed so far lacks the economic underpinnings provided by thoroughbred racing's prize money, the Arabian's popularity with wealthy investors is still growing.

How long can it last? "There's no guarantee in this business," warns Lasma's Jerry Wight, "but there are still only 300,000 registered Arabians in the country, and a lot more [potential buyers] who don't own Arabians." Skeptics, however, point out that the use of artificial insemination -- disallowed in thoroughbred breeding -- could result in a glut of pretty horses that can't maintain their high prices.

For the moment, Arabians are maintaining their appeal to investors. Thanks to that -- and to Sue Kiser's continuing willingness to work 16-hour days -- Fairlight Valley Arabians is already making money on operations. It isn't, however, wholly out of the red. "Stop to think how much money it costs to put up nice black wooden-rail fencing," Bill Kiser reminds a visitor. "You might say, 'That's a nice-looking fence,' but you don't stop to think that it costs over $25,000." Overall, the Kisers don't expect to be in the black for three to five years. Then, if the business continues to thrive, Fairlight Valley Arabians should provide the Kisers with a comfortable annual return on investment of 20% to 25%.

Sue Kiser, meanwhile, has quite another personal goal, which she discovered while visiting her mother, who was a patient for a short time at Memorial Sloan Kettering Hospital in Manhattan. After seeing young cancer patients die without their family members at their bedside, Sue says she would like to change things. "These children's parents couldn't afford New York City hotel prices. So I would like to create a network of homes across the country, similar to Ronald McDonald Houses, where needy families can stay, free of charge, while visiting their loved ones in the hospital."

How much would so ambitious a program cost? She sits silent for a moment, then, instead of answering directly, concludes, "I'm very lucky and I'm very happy. And I know I can do anything I set out to do if I'm honest, determined, and persistent." That sentiment, coming from a woman who has gone from delivering steel printing cylinders in a pickup to running a multimillion-dollar horse operation, may be right on the money.