The Last Shall Be First: Losers in '84 Climb to the Top

By JOHN M. BRODER

Jan. 2, 1986 12 AM PT

Times Staff Writer

What a difference a year makes. The surging 1985 stock market lifted four firms--including three in the troubled oil industry--from last year’s roster of the New York Stock Exchange’s 20 worst performing stocks to this year’s 20 best list.

But the rising tide didn’t lift all boats. Oil stocks continued to dominate the losers lists on the major stock exchanges, joined by computer equipment manufacturers and firms in bulk commodities and shipping, badly hurt by foreign competition and the strong dollar.

Companies that spectacularly outperform or lag the market are, almost by definition, freaks. Firms recording consistent growth or steady declines rarely show up on such lists. But market players who bet on a Xerox or a General Motors seldom see their investments quadruple in 52 weeks, as did those who wagered on a dramatic turnaround at Texas International, the Oklahoma City oil firm that jumped from sixth on last year’s NYSE losers list to the top spot among 1985’s winners.

The winners and losers lists were compiled by The Times and Data Resources Inc., an economic analysis firm in Lexington, Mass. Percentage gains and losses reflect 1985 stock splits and dividends.

The top firms on both NYSE rosters this year all have lost substantial amounts of money in the past several years. But the winners were those seen to have turned the corner. The dogs were diagnosed by investors as sick and getting sicker.

Although the best and worst performers were what analysts call “outliers” because they sit far outside the averages for their industries, some broad market and economic generalizations can be drawn from the types of companies that appear on the lists.

Involved in Takeovers

Companies involved in takeovers are heavily represented on the winner’s list, as are firms in financial services and equipment leasing. Over the past several years, the market has tended to reward with high stock prices firms that play the takeover game or trade in intangible financial assets. Companies that manufacture, distribute and sell goods are less glamorous and, for the most part, less highly valued by investors.

Thus, the winner’s list contains Triangle Industries, Jewelcor, Pantry Pride and GAF, all successful suitors in mergers. Representing financial services firms are two California thrifts, Downey Savings & Loan Assn. and Financial Corp. of Santa Barbara, two computer leasing concerns, Comdisco and Continental Information Services, and the Baltimore brokerage house Legg Mason.

The losers list is a catalogue of business woes, from deadly foreign competition to falling energy prices. The slump in agriculture and natural resources dragged several firms down, as did the problems of the U.S. computer industry. More than half of the firms whose share prices plummeted are undergoing liquidation, Chapter 11 reorganization or extensive internal restructuring.

Management Assistance, based in New York, won the dubious honor of recording the biggest year-to-year fall in its share price, posting an 88% drop. Shareholders of the data-processing firm approved a plan of complete liquidation last January following two disastrous years, and investor interest has been nil.

Close behind was Amfesco Industries of Plainview, N.Y., which saw its stock value drop 87.6%. The manufacturer of low-priced shoes, boots and sandals was decimated by imported footwear, principally from the Far East. It filed for protection under Chapter 11 of the U.S. Bankruptcy Code in November.

In all, five computer-related firms and four energy concerns graced the roster of hard-luck stories. Joining them were companies in forest products, fertilizers, cement, shipping and shipbuilding--all depressed sectors in a generally healthy economy.

“The general theme is that the losers were manufacturing and resource companies and their vendors,” said Lewis A. Sanders, director of research at the Wall Street investment house Sanford C. Bernstein & Co. “The winners were those in non-durable goods and service companies.

“The reason is plain to see. The slowdown in the recovery combined with the strength of the dollar in the first half of the year were terribly painful to the results of manufacturing and resource companies. The non-durable and service sector was insulated from those negatives. And investors reacted powerfully to those forces.”

Texas International Rebounds

Examples of hot non-durable and service stocks from the winners list include the Gap, a fast-growing nationwide retailer based in San Bruno, Calif., selling moderately priced jeans and casual clothes; Jewelcor, a chain of catalogue stores; the two California thrifts, and a firm specializing in computer services to the U.S. government, El Segundo-based Computer Sciences.

All, however, were bested by Texas International, whose shares last year fell 78% in value. This year, despite losses estimated by company officials at $35 million, the stock price rose 411% to $5.75 from $1.125.

“The main thing is that we have what appears to be a significant oil discovery in Egypt,” Texas International Chairman James Kishpaugh said in a telephone interview. “From an oil company’s standpoint, the name of the game is to find new reserves. When you do that, it adds value.”

Kishpaugh said the company will continue to lose money through 1986, as it has each year since 1983. After that the deluge, he predicted.

“Even though we don’t yet reflect the results of the new discovery in our profit sheet, the market understands that we’ve added a lot of value. We’ll continue our exploration and drilling program in 1986 and show some profits in 1987.”

Downey Savings & Loan, with a 346.7% share price increase, took the second spot on the winners list.

The firm engineered a turnaround after heavy losses in 1981 and 1982 by sticking to a conservative growth strategy and emphasizing quality in its loan portfolio, a company spokesman said.

Net Worth Doubles

Downey, which moved from the American Stock Exchange to the Big Board on Oct. 4, saw its stock rise from $23.50 to $32 in two weeks and closed the year at $41.875. The thrift’s net worth doubled in 1985, the spokesman said.

In third place was Triangle Industries, a maker of packaging products and vending machines based in New Brunswick, N.J. Its value was enhanced by the $460-million acquisition of National Can Corp. in June, and its stock split 2 for 1 in August. It benefited from strong demand for beer and soft-drink containers and its dominant position in the industry.

Other success stories included:

- Tosco Corp., a Santa Monica-based independent oil refiner that turned around a horrible performance in 1984 (fourth on the NYSE losers list) to post a 287.5% stock price increase in 1985. The company restructured its debt but remains vulnerable to a drop in refined oil prices.

- Tonka Corp., a repeater from last year’s winners list. The Minnesota-based toy maker followed its successful Go-Bots of 1984 with the wildly popular Pound Puppies this year. Its shares rose 168.3%.

- Rollins Environmental Services, a Wilmington, Del., toxic-waste disposal concern, another repeater. Despite regulatory problems in Louisiana that temporarily closed its Baton Rouge, La., incinerator, the company posted strong profits and sharp share price gains. In the first nine months of this year, the company earned nearly 50% more than in all of 1984, and its stock reflected the results with a 140.3% gain.

- Charter Co. and Williams Electronics moved from last year’s losers list to the 20 best roster this year. Charter, a Jacksonville, Fla., oil company, is struggling to emerge from bankruptcy while Williams, based in Chicago, shifted its focus from video games to casino hotels. Investors liked the prospects at both firms.

- Cray Research, Minneapolis, the world’s leading manufacturer of supercomputers. The company has been a spectacular performer, both technically and on the balance sheet. Investors pushed its share price up 149.5%.

Life was not so good to Management Assistance and its compatriots on the critical list.

Two troubled computer firms controlled by New York takeover specialist Asher B. Edelman--Management Assistance and Datapoint--made the 20 worst list. Another in which Edelman holds a substantial stake, Mohawk Data Sciences, also holds that distinction. Mohawk suffers from technical insolvency, and Datapoint lost nearly $50 million in its 1984-85 fiscal year.

Oil-Related Firms Slump

Four oil-related firms were among the big losers, including three of the top five. Kenai Corp., based in New York, moved up from 20th place on last year’s losers list to third this year amid continued losses and a deep slump in its oil field equipment and contract drilling businesses.

Buttes Gas & Oil of Oakland took the fourth spot in the wake of its November bankruptcy filing. It has lost money in 15 of the last 16 quarters. An oil industry analyst called Buttes “a disaster” and said he doubted it could emerge from Chapter 11.

Mesa Petroleum, T. Boone Pickens Jr.’s oil company and takeover vehicle, took fifth place with a 84.9% drop following the summer announcement that the firm would transfer most of its assets to a limited partnership to be listed separately on the NYSE. Two thwarted takeover bids also sapped Mesa of some of its recent luster.

Also among the walking wounded were Evans Products, a Portland, Ore., forest products and transportation equipment firm that filed for bankruptcy in March and whose NYSE trading was suspended in November; Brock Hotel Corp., a restaurant (Chuck E. Cheese) and hotel firm, and Beker Industries, a fertilizer maker that has lost money in four of the last five years.

1985 Top 20 NYSE Winners

Closing Price on Stock Dec. 31, 1985 Texas International $5.75 Downey Savings & Loan Assn. $41.875 Triangle Industries $33.50 Tosco $3.875 Gap $62.75 Jewelcor $18.375 Tonka $27.50 United Brands $27.75 Comdisco $28.625 Fin. Corp.-Santa Barbara $8.875 Williams Electronics $6.25 Cray Research $65.50 Vendo $10.75 Continental Info. Systems $14.75 Pantry Pride $9.75 GAF $59.00 Rollins Environmental Services $17.875 Computer Sciences $33.50 Charter Co. $2.375 Legg Mason $20.625

Percent Stock Change* Line of Business oil and gas exploration Texas International +411.1 and production Downey Savings & Loan Assn. +346.7 savings and loan Triangle Industries +312.3 packaging Tosco +287.5 petroleum refining Gap +204.2 clothing retailer Jewelcor +177.4 catalogue stores Tonka +168.3 toys United Brands +158.1 bananas and meatpacking computer sales and Comdisco +157.3 leasing Fin. Corp.-Santa Barbara +153.6 savings and loan Williams Electronics +150.0 video games, casinos Cray Research +149.5 supercomputers Vendo +145.7 vending machines computer sales and Continental Info. Systems +144.9 leasing Pantry Pride +143.8 retailer chemicals and building GAF +140.8 materials industrial waste Rollins Environmental Services +140.3 treatment and disposal Computer Sciences +139.3 computer services petroleum refining, Charter Co. +137.5 insurance Legg Mason +135.7 financial services ..TE: *Reflects stock splits and stock dividends

SOURCE: Data Resources Inc.

1985 Top 20 NYSE Losers

Closing Price on Percent Stock Dec. 31, 1985 Change* Management Assistance $3.25 -88.0 Amfesco Industries $1.375 -87.6 Kenai $0.156 -87.5 Buttes Gas & Oil $0.688 -85.9 Mesa Petroleum $2.75 -84.9 Tacoma Boatbuilding $0.813 -80.9 Evans Products $0.75 -79.3 Beker Industries $1.25 -78.3 Mohawk Data Sciences $2.50 -77.0 Brock Hotel $0.75 -75.0 Norlin $4.625 -74.1 Datapoint $5.25 -74.1 Global Marine $1.375 -70.3 Ideal Basic Industries $4.125 -70.0 GCA $7.50 -69.4 CLC of America $1.625 -66.7 Mission Insurance Group $2.875 -66.7 Computervision $12.625 -66.1 Elscint Ltd. $2.875 -61.7 Americana Hotels & Realty $10.50 -60.4

Stock Line of Business Management Assistance information systems Amfesco Industries footwear oil and gas contract Kenai drilling oil and gas exploration Buttes Gas & Oil and drilling oil and gas exploration Mesa Petroleum and drilling Tacoma Boatbuilding shipbuilding forest products and Evans Products transportation equipment Beker Industries fertilizers computer equipment and Mohawk Data Sciences services Brock Hotel restaurants and hotels musical instruments and Norlin printing computer equipment and Datapoint software Global Marine offshore oil drilling Ideal Basic Industries cement and potash GCA semiconductor equipment barge transport of bulk CLC of America commodities property and casualty Mission Insurance Group insurance Computervision computer design systems Elscint Ltd. medical imaging systems real estate investment Americana Hotels & Realty trust