It Was Watch, Worry for Most Market Players in the County
A dozen or so affluent Leisure World retirees gathered in front of the electronic ticker tape Monday at the Laguna Hills office of Crowell, Weedon & Co. and watched the stock market slide become an avalanche.
“Usually, we discuss politics, religion and sex,” said Saul Wilchinsky, 72. “You build an appetite and you go home and have lunch.”
But on Monday, they talked about the big crash--circa 1987, not 1929.
The Dow Jones industrial average plummeted a record 508 points in one day. Combined with the 394-point decline of the previous two weeks, the plunge that began Oct. 2 has more than wiped out the 826-point gain posted by the Dow since the beginning of the year.
While IBM, General Electric and other blue-chip firms were hit hardest in Monday’s record-shattering decline, which even eclipsed 1929’s infamous Black Tuesday, smaller companies’ stock prices also plunged.
In Orange County, the stock of 91 of the county’s 100 largest publicly held companies fell Monday, with 36 stocks sinking to their lowest prices of the past 12 months. Seven county-based companies treaded water, posting no change in stock price Monday from Friday’s close.
Just two local firms--PDA Engineering, a Santa Ana computer-aided engineering firm, and Startel, an Irvine maker of computer communication systems--gained in Monday’s trading. PDA increased 25 cents a share from Friday to close at $6, and Startel inched up 12.5-cents to close at 87.5 cents a share.
Shellshocked stockbrokers and analysts were perplexed by Monday’s market debacle.
They cited many reasons for the dramatic free fall--concern about rising interest rates, the possibility of resurging inflation and escalating hostilities between the United States and Iran. But they agreed that those anxieties were simply not enough to explain the crash.
Mostly, they blamed overvalued blue-chip firms and institutional selling triggered by computer-programmed trading.
Retail investors, they said, were holding steady--or at least most were.
“You don’t kill yourself. You don’t go home and beat your wife,” Wilchinsky said. “But what I have is going down, and I feel bad.”
Across the street, dozens of investors jammed the tiny Charles Schwab & Co. discount brokerage office, huddling before automatic stock quotation machines. Brokers handled more than twice the normal number of trades, operations supervisor Judy Riddle said.
“I could go cry or I could pound on my heart, but it wouldn’t do any good,” said one investor, a computer-systems analyst who left his own office Monday morning to spend the day at Schwab.
“I don’t know what to do,” said the investor, who requested anonymity. “I’m getting myself in trouble not being at work, and I’m losing my money.”
Some investors seemed bewildered.
“We’re not here to buy, and we’re not here to sell. I don’t know what we’re doing here,” one said.
John Sulages of Mission Viejo said he placed an order after the close of trading Monday to buy call options--speculating that the market will soon reverse its slide and increase in value--but he said he was one of only a few people betting on an upturn.
“I don’t know what’s going to happen,” Sulages said. “I could make money if the stock goes up. If it goes down, I lose $750. That’s nothing compared to what I’ve seen all day here.”
Some brokers, like Jeff Kilpatrick, president of Newport Securities Corp. in Costa Mesa, believe strongly that the time to buy is now. In fact, he helped one Orange County company buy back a significant share of its own stock at bargain prices. He would not name the firm.
Separately, AFG Industries in Irvine said Monday that it intends to buy up to 4 million shares of its common stock.
“Our feeling is that the stock is undervalued at these levels,” said Gary Miller, AFG’s vice president for finance. “Today’s big decline sort of precipitated the move.”
Many Orange County companies long have been undervalued and are now better bargains, Kilpatrick said, adding that he was preparing a list of current stock prices of county-based firms for some clients. He predicted that acquisitions and buyouts are in the offing.
“There’s got to be some T. Boone Pickens types out there, wringing their hands (and) looking for bargains,” he said. “A lot of companies I thought were cheap before are even cheaper now.”
That holds true for Orange County companies’ shares.
Since the close of trading on Oct. 2, stock prices in the 100 largest firms have tumbled an average of $2.63 a share. In addition, 47 firms lost at least $2 a share each and 34 companies lost at least 25% of their stock value.
During the period, 92 firms wound up losers, six firms remained flat and two were up slightly: American Pacific, an Irvine real estate firm, gained $0.375 a share to $4 a share; Petrominerals, a Stanton gas-drilling company, was up $0.125 a share to $1.25 a share.
The biggest loser was Viratek, a pharmaceutical marketing firm in Costa Mesa. Its stock price fell to $15.25 from $32 per share, a 47.4% drop spurred partly by its third-quarter financial results, which showed a $3.2-million loss and a 90% drop in revenues. The biggest percentage loser was Care Enterprises, a Laguna Hills nursing-care firm whose stock fell 53.3% to $1.875 from $4 a share.
Some bargain-hunting began Friday when the Dow dropped a then-record 108 points.
A customer at Shearson Lehman Brothers in Orange had been eager to buy Chrysler stock and recently instructed broker Roy Shapiro to buy as much as possible if the stock declined to $38 a share. On Friday, Shapiro bought the stock at $33 a share and said his client was “delighted.”
But on Monday, Chrysler stock fell to $27.75 a share, Shapiro said, and the customer was “disconcerted.”
“He wants it for his retirement, so he’ll keep it,” Shapiro said. “But I’m advising him not to buy any more until we see where it all settles. The problem with bottom fishing is you don’t know where bottom is.”
After Friday’s close, Shapiro figured that he would start grabbing bargains on Monday. “But when I saw where things were starting, I didn’t buy anything this morning,” he said.
Still, Shapiro said, “A lot of prices look good to me.”
Telephones at most brokerages were ringing all day as investors wanted to know, as Shapiro put it, “How low is low?”
Many brokers were trying to encourage investors to stay in the market.
“We’re trying to get clients to act with restraint,” said Frank Randall, branch manager at the Merrill Lynch brokerage in Laguna Hills. “We’re telling them to let the hysteria pass over, to be cool.”
Randall said his brokers are telling clients that if they were bullish in August--when the Dow reached its record high of 2,722--then they should be bullish now. Even if investors are pulling some of their money out, he said, they should keep at least 25% of their investment funds in the stock market.
Although brokers were urging their customers to remain calm, nerves were tightly wound on Wall Street.
A reporter was talking to Benny Lorenzo, a technology analyst at L.F. Rothschild in New York, about a new computer introduced Monday by an Irvine-based company when Lorenzo learned about IBM’s stock fall and abruptly ended the conversation.
“Oh, my God! IBM’s at $102!” Lorenzo said. “Look, I can’t talk now.” And he hung up.
“A lot of widows and orphans are living on IBM stock,” Shapiro said. “Let’s hope a lot of them got out. There is no room for the squeamish now.”
ORANGE COUNTY STOCKS AT A GLANCE How the largest firms did
(ranked by sales)
% change Close from 10/19 10/2 Smith Int’l 8.00 -9.8 Fluor 14.75 -27.2 Western Digital 16.25 -35.9 Transcon 3.50 -22.2 AFG Ind. 21.87 -31.4 Five biggest losers Care Enterprises 1.87 -53.3 Cushman Elec. .50 -50.0 Far West Fin. 7.00 -50.0 Viratek 16.75 -47.7 Clothestime 8.50 -46.9 Two that gained (from 10/2 to 10/19) American Pacific 4.00 +0.38 Petrominerals 1.26 +11.60 Two winners yesterday Friday Monday (10/16) (10/19) PDA Engineering 5.75 6.00 Startel .75 .87
