How San Diego Firms Handled the Ups, Downs

Despite the major stock market gains made by many larger industrial companies, San Diego stocks--with the exception of those involved with mergers and acquisitions--had difficulty keeping up with the market average.

In addition, stocks that made major gains in 1985 had difficulty continuing that trend in 1986.

Rather than comparing individual stock performance to the Dow Jones Industrial Average, which rose 22.58% in 1986, we should consider the Standard & Poor’s 500 stock average, which was up 14.62% for the year, or the NASDAQ composite of about 4,000 over-the-counter stocks, which managed a gain of only 7.35% for the year.

While interest rates declined in 1986 and there was relatively low inflation, there also was little improvement in corporate earnings. That caused disenchantment with stock prices in the later part of the year.

We have attempted to list most of the companies based in San Diego that are listed on the NYSE, AMEX and NASDAQ, and to explain some of the reasons for their movement up or down.

The market price of a company’s stock attempts to place a present value on the past, present and future prospects that investors perceive at that given moment. The comparisons are for percentage changes in stock prices during calendar year 1986.

Airlines

The big news of 1986 was the proposed acquisition of Pacific Southwest Airlines--70% held by PS Group (nee PSA)--at $16 per share by U.S. Air. The airline stock was publicly offered at $7 per share during the year. PS Group, the parent company, will receive an estimated $280 million, post-tax, for its airline holdings. PS Group rose 39.5% for the year.

Finance

Imperial Corp. Of America, the laggard in 1985, was the local industry leader in 1986, increasing 34.1% in price, as new management brought an immediate turnaround in earnings and prospects.

Great American First Savings Bank, which split its stock and expanded into Arizona with an acquisition that made it San Diego’s largest S&L;, was up 17.6%.

Home Federal Savings & Loan, now the county’s second-largest thrift, was relatively unchanged for the year.

Sun Savings & Loan Assn., which closed at 3 7/8 at year-end 1985, became worthless in mid-1986, as federal regulators took the bank over and changed its name to Flagship Bank, and eliminated any shareholder equity. The new bank is not a public company.

San Diego Bancorp, which owned El Camino Thrift & Loan and traded at five-sixteenths at year-end 1985, sold El Camino for $1 per share, and saw its stock sink into oblivion.

New banking laws that allow the acquisition of California banks by those in 11 Western states become effective July 1, 1987; nationwide interstate banking will be allowed after Jan. 1, 1991. That trend sparked increased activity at some local banks. First National Corp. (parent of First National Bank), which announced a merger with two well-situated local banks, was the major mover, climbing 53.6%, while BSD Bancorp, Southwest Bank and La Jolla Bancorp, all now listed on the American Stock Exchange, were down fractionally.

Energy-Related Stocks

San Diego Gas & Electric closed the year at 33 7/8, up 25.5% from last year but down from its high of 42 1/2, reached in September, when virtually all analysts were recommending its purchase.

Energy Factors, which was up 150% in 1985, dropped 37.3% in 1986 to 13, because of the company’s necessary financing to fund rapid expansion and acquisitions. In addition, earnings were diluted by a doubling of the number of shares outstanding and were further affected by a loss of investment credits. San Diego Gas & Electric sold its 20% position near the stock’s high of 23.

Defense Contractors

With threatened cutbacks in the country’s defense expenditures and budget cuts likely by a Democratic Congress, most of the companies in the defense group showed stock losses, with minor exceptions.

Cubic Corp. was down 28.1% as it experienced production problems and resultant lower earnings for the year.

IRT Corp., which underestimated development costs on its new product line and reported resultant losses, was down 35.5% as it removed its long-tenured president.

Titan Corp., which announced a string of acquisitions throughout the year and showed improved profits, nonetheless was down 26.4%, after an 89.5% gain in 1985.

GTI Corp., which hasn’t been profitable for a few years, announced it would liquidate, producing a 44.4% jump in its stock price.

Decom Systems, which became profitable after loses in 1985, was up 88.5% from a very depressed price of 1 1/2 at year-end 1985.

Humphrey Inc. was down 39.6%, despite a profit during the year.

Langley was up 13%, while Maxwell Laboratories dropped 12.1%, despite a proliferation of Star War contracts.

Aerospace

Rohr Industries was unchanged for the year, as earnings were flat and long-term development costs cut into immediate quarterly earnings.

Precision Aerotech went public at $7.75 on the AMEX, but it closed the year at 6, a new low.

Electronics

As a group, these companies joined the computer-related firms as among the poorest-performing San Diego stocks.

Cohu Inc. was down 33.3% on lower earnings.

Oak Industries was down 46.7% on no earnings.

International Totalizator, with decreased current earnings, was down 11.4%, despite a 2-for-1 stock split and an increasing backlog.

Monitor Technologies (nee Monitor Labs) was down 48.4% as it wrote off its vision inspections system with a loss for the year.

Wavetek, which under new management showed a respectable profit for the year, was down 5.1% as auditors qualified the company’s financial statements.

Two electronics companies moved their headquarters to San Diego last year with mixed results. CCT Corp. was down 49% on an aborted sale of its Zeta Laboratories subsidiary, while DH Technologies was up 54.1% from its year-end 1985 price of 3.

Telequest is another newcomer to San Diego. The manufacturer and distributor of innovative telephone equipment went public last year at 13, but saw its stock sink to 3 as it forecast a break-even year because of shipment delays and reduced profit margins.

The star of this group and all San Diego stocks was a company that moved to San Diego in 1985. Linear Corp., which closed 1985 at 3 3/4, rose to 8 3/4 at year-end 1986, for a gain of 133.3%.

An interesting anomaly in this group was Sym-Tek Systems, which rose 24.5%--probably the best performance of any company in the depressed semi-conductor industry.

Computer-Related

Most were down for the year. Cipher Data Products was down 36% as earnings projections were pushed further into the future.

Kaypro managed to barely break even, only dropping 4.3% to 1 3/8. The company went public at $10 per share. National Micronetics, which is leaving San Diego, was down 44.6% to 1.

Personal Computer Products was up 32.1%, despite continued losses, a shortage of working capital and the most unusual price action of a stock with such poor prospects.

Integrated Software Systems was purchased by Computer Associates International at $12.37, down 23.9% from last year’s close and significantly below 22.75 and 16--the prices of the company’s public offerings.

Retailing

Price Co. lost some of its momentum as profit margins contracted, competition reared its ugly head and some store openings were delayed. The stock dropped a minor 6.4%. Stockholders with longer memories will recall that the stock rose 70% in 1985. The shares were split 2-for-1 in 1986.

Cousins Home Furnishings went through a series of store name changes, none of which could produce a profit as the stock fell 45.7%.

Shareholders of Handyman were amply rewarded for one year of patience as the stock, which traded in the 20s in 1985 after spinning off from Edison Brothers Stores, was up more than 60% after the company announced its liquidation. The sale will ultimately result in a minimum of $47.11 per share within the next three years. An initial payment of $20 was made in 1986.

Biotechnology

Hybritech was absorbed by Eli Lilly in a complicated exchange of securities. San Diego’s largest biotechnology concern couldn’t resist the Lilly overture of unlimited resources for research and an excellent price for its stock, which rose 85% in 1986 in anticipation of the buy-out.

Molecular Biosystems rose 35.4% and Synbiotics, which split its stock 2-for-1 and had a successful secondary offering, rose 3.5%.

New additions to this group were Syntro Corp., which went public at $8.50 and closed the year at 4, for a loss of 50%.

Another newcomer to San Diego was Xytronyx, which moved from Chicago and saw its stock rise 62% as it continues development of various products based on biotechnology.

Specialty and Service

For want of a better classification, the three companies listed herein have done exceptionally well in 1986.

WD-40, the one-product company, had its most profitable year ever and made a new all-time high of 33 1/2, for a 44.1% gain for 1986.

Mail Boxes Inc. went public in 1986 at 11. It is showing spectacular growth in its quarterly earnings as it rapidly expands its franchise system throughout the United States. The stock closed the year at 18 1/2, a new high and a gain of 68.2% from its offering price. The company declared a 20% stock dividend.

Video Library, which went public in a self-underwriting at 3, has become profitable in 1986 and saw its stock close 1986 at 4 1/8 for a 37.5% gain.

Medical Technology

San Diego is the start-up mecca for John Pappajohn’s venture capital public offerings. None of them is yet profitable, but Infrasonics is the closest, as it doubled in 1986 to 1 7/8. The company successfully had its warrants exercised.

Medical Imaging Centers was up 10%, but was still not profitable, while Pancretec was down 59.5%, with continuing losses, changing presidents and in dire need of capital.

Women’s Health Centers went public at 6 and sunk to a year-end close of 1 7/8, for a drop of 68.75% since going public.

Robotics

International Robomation, which is San Diego’s last remaining public entity in this category, has been profitable for seven consecutive quarters and saw its stock rise only 3.1%.

Real Estate

Mission West Properties, 50% owned by Intermark, finally booked a $10-million profit on its long-litigated Del Mar property. The stock was up 41.3% for the year.

Christiana Cos. went through a number of controlling shareholders and presidents and dropped 39.7%.

A new addition to San Diego public companies and a successful initial public offering was Guild Mortgage Investments, a real estate investment trust managed by Guild Mortgage Co. The offering was at 10 and the stock closed the year at 11 5/8, a gain of 16.25%.

Conglomerates

Intermark, which controls a host of companies, including Pier One, Mission West Properties and Triton Corp., was unchanged for the year after 5-for-4 and 4-for-3 stock splits during the year. The stock rose 50% in 1985.

Triton Corp. moved to San Diego from Los Angeles and is itself a conglomerate controlled by Intermark. Intermark transferred its U.S. Press division to the Continental Graphics division of Triton for 25 million shares. Triton closed the year at $1 per share.

The largest public stock offering of a company was the Henley Group, which was spun off from Allied-Signal. These 21 companies are all unprofitable but are awaiting the “magic” of Chief Executive Michael Dingman. The stock went public at 21 and closed the year at 22 5/8.

Miscellaneous

Western Health Plans, the HMO parent of physician-controlled Greater San Diego Health Plan, changed presidents but saw its stock drop 44.1% before the new organizational changes could be implemented.

Beeba’s Creations, a knock-off clothing manufacturer that nearly doubled in 1985, rose a minuscule 5.4% last year.

Great American Resources, an oil and gas management limited partnership, was up 60%, to $2 per share.

Specialized Systems, which was an electronic company and now manufactures imprinted T-shirts, was unchanged for the year at $1 per share.

Hotels

Northview Corp., owner of the Vagabond Hotel chain, remained under the cloud of majority shareholder Ivan Boesky and his “riskless” arbitrage transactions. New management is inheriting a depressed stock, which was down 22.8% last year.

Fabulous Inns, which appears about ready to have its long-awaited annual meeting on Jan. 30, was up 54.5%, as management disputes and the brouhaha might finally be resolved.