1984 A Year of Frustration: Investors Fret Despite Gains in the Economy : Turnarounds and Toys Top the Big Board : Allied Products Leads Winners List; Charter Posts Largest Decline
In the meandering market of 1984, some of the most spectacular performances were turned in by companies in fairly mundane fields that engineered turnarounds during the year. Among them was a diversified manufacturer of farm equipment and industrial products and a company that produces gypsum board.
Other top picks among the approximately 1,500 common stocks on the New York Stock Exchange were toy makers, takeover targets and Tootsie Roll Industries, which has enjoyed several years of strong sales and earnings gains.
The worst performers of the year came from the ranks of oil companies and firms that filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The list was led by a company that fell into both categories: Charter Co., a petroleum refiner, oil marketer and insurance company that entered Chapter 11 proceedings in April, saw its stock price plummet 91%.
The Big Board’s best-performing stock of 1984 was Allied Products Corp. of Chicago, according to data compiled by The Times and Data Resources Inc. of Lexington, Mass.
Turnaround at Allied
Allied Products, which makes farm equipment and such industrial products as fasteners and auto and truck parts, had a nearly 123% increase in its stock price, to $19.50 on Dec. 31 from $8.75 at the end of 1983. (Prices are adjusted for stock splits and dividends.)
For Allied Products, “this has been a helluva year,” President Richard Drexler said. Following two years of losses, Allied expects a $9-million profit in 1984 on sales of $320 million, he said.
Allied Products has been undergoing an aggressive divestiture program, selling 27 money-losing or marginally profitable businesses in 25 months, Drexler said.
At the same time, the company has been expanding--partly through acquisitions--its farm-equipment business, which has managed to remain profitable during the last few years when the rest of the industry was losing money.
Allied has benefited from rising automobile and truck production and increased agricultural planting that resulted from sharp reductions in the federal payment-in-kind program, according to Value Line Investment Survey.
Republic Gypsum No. 2
Republic Gypsum Co. of Dallas captured the No. 2 spot on the NYSE winners list. Republic’s stock, which moved to the NYSE from the American Stock Exchange in November, jumped 114% to $18.75.
Republic saw demand improve for its products--gypsum wallboard, paperboard and other building products--as interest rates fell and construction increased.
For the year ended June 30, 1984, Republic Gypsum recorded a 121% increase in revenue and a 316% increase in net income, although sales and earnings for the July to September quarter declined from the previous quarter because rising interest rates slowed housing starts.
Further down the winners list was Wilmington, Del.-based Rollins Environmental Services Inc., which treats and disposes of hazardous wastes. Rollins’ stock price rose 94% to $14.875.
For the year ended Sept. 30, Rollins sales rose 44%, while income leaped 130% from depressed 1983 levels thanks to a “growing awareness by companies to increasingly tough environmental regulations (dealing with) hazardous wastes,” said Jeffrey A. Klein, an analyst with Kidder, Peabody & Co.
Rollins specializes in hazardous waste incineration, which is growing in popularity even though it is more expensive than other disposal methods because it is more permanent, Klein said.
Toy companies were well represented among 1984 winners. Mattel Inc.’s stock jumped 105% to $10.25 and Tonka’s stock rose 82% to $41.
For traditional toy companies, 1984 was one of the best years ever. In the first nine months of the year, shipments were up 52% and orders increased 83%, according to the Toy Manufacturers of America, a trade group.
Traditional Toys Up
Toy company stocks were even higher on the winners list until last Thursday, when Wall Street reacted badly to an announcement by retailer Toys ‘R’ Us that Christmas sales, although up a healthy 16.9%, had been lower than anticipated.
Traditional toys had a good year because the decline in popularity of video games and home computers “probably left $1 billion plus in consumers’ pockets to buy other holiday items,” said David Leibowitz, senior vice president of New York-based American Securities Corp.
Hawthorne-based Mattel, following a sharp earnings decline in 1983 when the video-game and home-computer markets were overrun with competitor’s products, sold all its non-toy businesses and returned to profitability. The company, which was No. 2 on the 1983 NYSE losers list, completed a financial restructuring in July by selling a 45% voting stake to raise $231 million in cash.
For the nine months ended Oct. 27, Mattel reported income of $86.6 million on revenue of $731.7 million compared to the year before, when it lost $222.8 million on revenue of $497 million. “Mattel stayed where it has always been successful in the past,” Leibowitz said.
Tonka Corp. of Spring Park, Minn., also experienced a turnaround in 1984 following two years of losses. Tonka’s success was fueled by its line of GoBots, robots that can be transformed into cars, planes and other items by twisting hinged parts.
Takeover targets, both rumored and real, also were well represented among the best-performing stocks of the year.
For the first nine months of 1984, there were 179 acquisitions of publicly traded companies, compared to 130 in the same period last year, according to W. T. Grimm & Co., a Chicago-based merger specialist. Overall for the first nine months, there were 1,899 mergers, compared to 1,812 in the first nine months of 1983.
Cowles Broadcasting Inc., a small Daytona Beach, Fla.-based company that owns two network-affiliated television stations, is about to be taken private by H&C; Communications Inc. for $46 a share. Cowles’ stock rose 94.7% to $45.75.
Donaldson, Lufkin & Jenrette Inc., parent of Donaldson, Lufkin & Jenrette Securities, agreed in principle in November to be acquired by Equitable Life Assurance Society of the United States for $30 per common share and $230.77 for each share of DLJ Series A preferred stock. DLJ’s stock closed the year at $29.875, up 86.7%.
A bidding war erupted in 1984 for the bankrupt Milwaukee Road railroad,, which is 96% owned by Chicago Milwaukee Corp. Rival bids by Soo Line Railroad Co. and Chicago & North Western Transportation Corp. are being considered by a bankruptcy court, under whose protection Milwaukee Road (formerly known as the Chicago, Milwaukee, St. Paul & Pacific Railroad) has operated since December, 1977.
“As the bids went up, the value of Chicago Milwaukee increased and that was reflected in the price of Chicago Milwaukee’s stock,” said Burton Strauss, an analyst with E. F. Hutton. Chicago Milwaukee’s stock rose 92% to $186.25.
Persistent takeover rumors dogged Chicago-based Tootsie Roll Industries Inc., where insiders control 57.6% of the stock.
In addition, the confectionery industry performed well during the year, drawing attention to Tootsie Roll, which has achieved healthy sales and earnings increases for several years, Leibowitz said.
A collection of hard-luck stories dominated the list of companies with the largest stock declines in 1984.
Charter Co. of Jacksonville, Fla., in April filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code because of a loss of trade credit for its oil refining operations. The company’s insurance subsidiaries, which weren’t included in the Chapter 11 filing, also suffered from bad publicity over the single-premium deferred annuity in the wake of Baldwin-United Corp.’s 1983 bankruptcy.
Last year was another bad one for many oil companies because of soft prices and excess refining capacity left over from the heady days of the late 1970s. Besides Charter Co., whose stock dropped 91% to $1, Santa Monica-based Tosco Corp.’s stock fell 80% to $1, Tulsa, Okla.-based Energy Exchange’s stock sank 79.2% to $0.156 and Oklahoma City-based Texas International Co.’s stock slipped 78% to $1.125.
Tosco, which was 10th on the 1983 losers list, began suffering heavy losses in 1983 after the promising synthetic fuels industry collapsed as oil prices fell. Under an agreement between Tosco and its banks, management and operating strategy have been changed but losses have continued.
Tosco has done a good job of reducing operating costs and personnel but has suffered from the rising price of once-cheap heavy crude, which it refines, said L. Craig Schwerdt, an analyst with Morgan, Olmstead, Kennedy & Gardner in Los Angeles.
Chapter 11 bankruptcy proceedings captured a variety of companies on the losers list in 1984.
Mobile Home Industries Inc. of Tallahassee, Fla., which expanded aggressively in the early 1970s, was plagued by high repossession costs. Although operations were reduced, Mobile Home Industries had continuing cash-flow problems.
Mobile Home Industries filed for Chapter 11 protection in early December. The company’s stock ended the year at $0.563, down 86%.
Storage Technology Corp., a Louisville, Colo.-based manufacturer of IBM-compatible computer disk and tape storage equipment, filed for Chapter 11 protection in October. The company fell victim to its battle with giant International Business Machines Corp., which has become increasingly competitive in a variety of areas. Storage Technology’s stock, which was 17th on the 1983 losers list, fell 83.5% to $2.25.
Western Union Corp., the Saddle River, N.J.-based parent of Western Union Telegraph Co., saw its stock price fall 76% to $8.75.
Troubles continue at Baldwin-United, which filed for Chapter 11 protection in September, 1983. Baldwin sold several operations during the year but in September said that the company’s debt load was a continuing obstacle for stockholders seeking to recoup some of their investment. Baldwin-United, which led the 1983 losers list, saw its stock drop 75% to $0.625.
1984 Top 20 NYSE Winners
Closing prices on Percent Stock Dec. 31, 1984 Change* Allied Products $19.500 +122.8 Republic Gypsum $18.750 +114.2 Mattel $10.250 +105.0 Cowles Broadcasting $45.750 +94.7 Rollins Environmental Services $14.875 +94.0 Chicago Milwaukee $186.250 +92.0 Donaldson, Lufkin & Jenrette $29,875 +86.7 Tonka $41.000 +82.2 Tootsie Roll Industries $31.000 +79.9 Orange-Co $10.250 +79.4 Christiana Companies $9.125 +69.8 Leucadia National $28.750 +69.1 Ala Moana Hawaii Properties $4.000 +68.4 UNC Resources $9,250 +68.1 Harcourt Brace Jovanovich $44.875 +66.2 Macmillan $46.500 +65.3 Kuhlman $17.125 +63.1 Dreyfus $37.750 +60.6 Jefferson-Pilot $40.250 +59.9 National Fuel Gas $26.000 +57.8
Stock Line of Business Allied Products agricultural & industrial products Republic Gypsum gypsum board & paperboard Mattel toys Cowles Broadcasting owns two television stations Rollins Environmental Services industrial waste treatment & disposal Chicago Milwaukee railroad Donaldson, Lufkin & Jenrette financial services Tonka toys Tootsie Roll Industries candy Orange-Co citrus fruit & frozen orange juice Christiana Companies real estate, investment banking Leucadia National consumer finance, insurance Ala Moana Hawaii Properties real estate limited partnership UNC Resources nuclear components, machine tools Harcourt Brace Jovanovich publishing, insurance, TV, theme parks Macmillan publishing, training schools, Gumps stores Kuhlman transformers plastic & metal products Dreyfus financial services Jefferson-Pilot life insurance National Fuel Gas natural gas system
*Reflects stock splits and stock dividends SOURCE: Data Resources Inc. 1984 Top 20 NYSE Losers
Closing prices on Percent Stock Dec. 31, 1984 Change* Charter Co. $1.000 -91.1 Mobile Home Industries $0.563 -85.9 Storage Technology $2.250 -83.4 Tosco $1.000 -80.0 Energy Exchange $0.156 -79.2 Texas International Co. $1.125 -78.0 Western Union $8.750 -76.0 Baldwin United $0.625 -75.0 Keystone Consolidated Indus. $3.125 -74.5 Hesston $5.625 -74.1 Omnicare $7.625 -74.0 Continental Illinois $5.750 -73.7 Cook United $1.125 -73.5 Newpark Resources $1.625 -73.4 Hallwood Group $1.125 -72.7 Williams Electronics $2.500 -71.8 Canal-Randolph $28.250 -71.4 L.E. Myers Co. $4.250 -70.2 Valero Energy $6.250 -70.1 Kenai $1.250 -68.7
Stock Line of Business Charter Co. petroleum refining, insurance, oil marketing Mobile Home Industries mobile home retailing Storage Technology computer disk & tape storage equipment Tosco petroleum refiner Energy Exchange oil & natural gas exploration Texas International Co. oil & gas exploration Western Union telecommunications Baldwin United financial services & insurance Keystone Consolidated Indus. steel rods, wire goods, industrial fasteners Hesston agricultural machinery Omnicare manages pharmacies, sells medical supplies Continental Illinois banking Cook United discount retailer Newpark Resources oil & gas services Hallwood Group real estate, financial services Williams Electronics video games, hotels Canal-Randolph real estate, stockyards L.E. Myers Co. builds electric utility facilities Valero Energy oil & gas distribution, production, equipment Kenai oil & gas contract drilling
*Reflects stock splits and stock dividends SOURCE: Data Resources Inc. 1984 Top 10 American Winners
Closing prices on Percent Stock Dec. 31, 1984 Change* Line of Business Sterling Extruder $16.125 +258.3 extrusion machinery Louisville Cement $70.375 +132.6 cement Cagle’s Inc. $7.875 +110.0 poultry & other food products Continental Airlines $8.375 +109.4 air carrier Hasbro Bradley Industries $54.250 +100.9 toys Seton Co. $15.875 +95.4 leather, chemicals & coatings Lynch Communication System $25.875 +93.5 telecommunications equipment Power Test Corp. $20.750 +90.6 gasoline distributor BIC Corp. $22.875 +86.7 pens & other consumer products Charter Medical $33.000 +82.1 hospital and medical services management
*Reflects stock splits and stock dividends SOURCE: Data Resources Inc. 1984 Top 10 American Losers
Closing prices on Percent Stock Dec. 31, 1984 Change* Line of Business Custom Energy Services $0.813 -90.6 piping components for energy industry Wespercorp $0.875 -89.7 tape & disk drives, printer controllers Seiscom Delta $0.813 -88.8 seismic data for oil & gas industry BTK Industries $0.313 -88.1 apparel Commodore Corp. $0.750 -87.5 manufactured housing Intertec Data Systems $1.125 -84.7 microcomputers Heizer Corp. $2.625 -84.0 business development Plant Industries $0.375 -81.2 plastic packaging products Superior Care $0.688 -81.0 home health-care services Crystal Oil $3.250 -77.4 oil & gas production
*Reflects stock splits and stock dividends SOURCE: Data Resources Inc. 1984 Top 10 OTC Winners
Closing prices on Percent Stock Dec. 31, 1984 Change* JP Industries $11.500 +801.9 Energy Capital Development $1.875 +650.0 Panatech Research & Devel. $4.625 +428.6 Edgcomb Steel of New England $31.000 +365.0 Computer Store $3.625 +314.3 Environmental Tectonics $10.500 +293.7 Dixson $3.250 +273.7 Outback Oil & Mineral Explor. $0.875 +250.0 TSR Inc. $18.250 +213.8 Mechtron International $13.250 +220.6
Stock Line of Business JP Industries plumbing products, vehicle components Energy Capital Development oil & gas exploration, production Panatech Research & Devel. electronic & computer- related products Edgcomb Steel of New England aluminum & steel Computer Store sells personal & small business computers Environmental Tectonics environmental equipment Dixson vehicle test equipment, electrical panel meters Outback Oil & Mineral Explor. oil & gas drilling TSR Inc. data processing services Mechtron International industrial burners, controls
*Reflects stock splits and stock dividends SOURCE: Data Resources Inc. 1984 Top 10 OTC Losers
Closing prices on Percent Stock Dec. 31, 1984 Change* Line of Business Omnidentix Systems $0.063 -96.9 shopping mall dental franchises Enterprise Technologies $0.031 -96.4 fuel oil distribution, energy development Combined Cos. $0.063 -95.8 sells premium items & advertising materials Oiltech Inc. $0.156 -95.8 oil & gas exploration, development Microfast Software $0.063 -95.0 computer software, consumer electronics Petrie Corp. $0.250 -95.0 behavior modification programs Peoples Restaurants $0.375 -94.9 family-style restaurants Diet Institute $0.031 -93.7 weight reduction centers Vitality Unlimited $0.250 -93.7 natural vitamins, foods & personal care goods Good Taco Corp. $0.313 -93.6 fast-food restaurant franchises
*Reflects stock splits and stock dividends SOURCE: Data Resources Inc.
