2 of 3 Firms in County Under-Performed Stock Market in Year After the Big Crash
About two out of three Orange County companies under-performed the stock market in the year following Black Monday, according to a Times stock price comparison.
The shares of only 34 of 100 surveyed companies increased by more than the 23% gain posted by the Dow Jones Industrial Average from Oct. 19, 1987, the day the market melted down, to Oct. 19, 1988, the 1-year anniversary of the crash.
Those companies that outperformed the average chalked up gains largely as a result of improved sales and earnings. And those that under-performed the Dow did so largely as a result of deteriorating profits or increasing investor skittishness about young, start-up companies, particularly in the high-tech sector.
“All in all, I think this shows that the market’s behavior isn’t as irrational as suggested by the October ’87 experience,” said Jeff Kilpatrick, president of Newport Securities, which specializes in Orange County stocks.
Cushman Electronics, a small Newport Beach radio and telephone test-equipment manufacturer, was the biggest percentage gainer, soaring 175% in value in the 12 months following the crash.
Cushman had been in deep trouble in recent years, laying off workers and idling production facilities. But after several years of losses, the company returned to profitability in the quarter ended Dec. 31, 1987. In the last 12 months, Cushman stock has leaped from 50 cents a share to $1.375.
On the bottom end of the scale, TS Industries, a Huntington Beach insulation maker, lost a whopping 97% of its value, a staggering decline linked directly to the crash.
Firm Went Belly Up
Most of the plunge took place in the weeks following the crash, when the company’s New York investment bank, Haas Securities, went belly up. Haas, which had been accumulating TS Industries stock in margin accounts, was unable to meet margin calls on TS and other stock. In a margin account, the purchase of stock is financed partly with debt.
The collapse of Haas sent TS Industries stock into a free-fall, according to Erik Wachmeister, managing director of Ladenburg, Thalmann & Co., which is now serving as the company’s financial consultant.
TS Industries stock plunged from $31 a share at the close of trading on Black Monday to $1.0625 per share last Wednesday, the crash anniversary. (It slid further to 93.75 cents per share on Friday.)
In September, TS Industries announced that it would move its headquarters to Salt Lake City in a consolidation effort designed to cut overhead, company officials said.
The price movement of most Orange County companies, however, was not as directly affected by the crash.
Of those issues that outperformed the Dow, J.M. Peters finished second with a 136% gain for the year. Stock in the Newport Beach home-building firm rose from $3.50 per share to $8.25 over the 12 months. (The stock closed Friday at $9.25.)
The situation at Peters, which has been reporting skyrocketing sales in recent quarters, reflects the overall boom in the Southern Californian real estate market, according to Mark Matheson, an analyst for Cruttenden & Co. in Newport Beach.
“With people camping out to buy one of their homes, it stands to reason that they might want to own some of J.M. Peters’ stock,” Matheson said.
Peters stock climbed as high as $10.25 a share during the past year. Southmark Corp., a Dallas financial services and real estate company, owns 87.3% of J.M. Peters stock.
In certain respects, the results of the stock price comparison are somewhat skewed by the presence of very small companies with a relatively small number of publicly traded shares, according to Matheson.
“A lot of these companies are so illiquid that they dropped very quickly following the crash,” Matheson said. “Then it didn’t take much interest to get them back up sharply. These can be very volatile stocks.”.
As a result, he said, “there are a lot of people who made a lot of money stepping up to bat when things looked bleak.”
When the smaller companies are excluded, a picture emerges of about 60 to 70 established Orange County companies that have performed at about par with the Dow Jones Industrial Average, Kilpatrick said.
Such companies as American Stores, up 26% for the year ended last Wednesday; Emulex, up 89%; Micro D, up 12%; Gradco, up 60%, and Silicon Systems, up 24%, are representative of that group, he said.
“The Dow comes out looking better because it is comprised of the more solid and financially secure companies in the country,” Kilpatrick said. “When you look at Orange County’s best companies, you might even call it a 12-month bull market.”
A broad spectrum of industry groups were among the top gainers. In the food products sector, Bridgford Foods Corp., an Anaheim company, gained 121%. The percentage gain reflects a 3-for-2 stock split in January.
Adjusted for the split, Bridgford rose from $8.25 a share to $18.25 last Wednesday. (It closed Friday at $18.50.)
Earning Nearly Doubled
Bridgford has earned $2.4 million over the last four quarters, nearly double its earnings in the previous 12 months. In addition, the stock received a boost last week from attention focused on the food industry following Philip Morris’ $11.5-billion takeover bid for Kraft Inc.
In the medical technology sector, Trimedyne Inc. was a big winner, up from $9.125 on Black Monday to $20.25 last Wednesday, a 122% increase. (The stock finished the week at $22.)
Trimedyne, a Santa Ana manufacturer of laser catheters used to treat blocked arteries, posted a quantum leap in profits in the 9-month period ended June 30. Net income increased to $3.7 million from $319,000. Sales grew 155% to $20.6 million from $8.1 million.
Last week, Trimedyne announced plans to move to larger manufacturing and office facilities in Tustin.
THE CRASH--ONE YEAR REMOVED
One year after the great crash of 1987, the stock prices of many Orange County companies have failed to match the 23% gain posted by the Dow Jones Industrial Average. Following is a selected list of county companies and their closing stock prices on Oct. 19, 1987, which has come to be known as Black Monday, and Oct. 19, 1988. The 1987 prices have been adjusted to reflect any subsequent stock splits or stock dividends.
Price on Price on Pct. Name/Product 10/19/87 10/19/88 Change Cushman/Test instruments 1/2 1 3/8 +175 J.M. Peters/Homebuilder 3 1/2 8 +136 ICN Biomed/Diagnostic Tests 6 13 3/4 +129 Trimedyne/Laser catheters 9 1/8 20 +122 Bridgford/Food products 8 18 +121 MSI Data/Data terminals 10 5/8 22 1/2 +112 Nichols Institute/Test kits 5 1/2 11 1/2 +109 Bergen Brunswig/Drug distributor 11 3/8 22 1/8 +95 Laser Precision/Lasers 3 3/4 7 1/8 +90 Emulex/Electronics 5 1/2 10 3/8 +89 Hycor/Biomedical 1 1 +83 FHP Corp./HMO 7 3/8 12 5/8 +71 Carl Karcher/Fast food 15 24 3/4 +65 Newport Pharm./Drug maker 3 5/8 5 7/8 +62 Gradco/Paper sorters 7 1/8 11 1/2 +61 Alliance Imaging/Medical imaging 6 9 3/8 +50 PacifiCare/HMO 7 7/8 11 3/4 +49 Gish Biomedical/Medical devices 4 1/2 6 5/8 +47 Newport Corp./Laser research 9 3/8 13 5/8 +45 Fluorocarbon/High-tech plastics 10 14 7/8 +45 Fluor/Eng.,const., mining 14 3/4 21 +44 Alpha Microsystems/Computers 4 3/4 6 3/4 +42 Micro General/Electronics 5/16 7/16 +42 National Education/Voc. training 19 25 3/4 +34 Downey S&L;/S&L; 14 1/2 19 1/8 +32 Standard Pacific/Home construction 8 10 1/2 +31 Armor All/Car care 17 1/8 22 +30 SPI Pharmaceutical/Drug maker 9 1/2 12 3/8 +30 Quiksilver/Clothing mfg. 4 3/4 6 1/8 +29 Ropak /Plastic products 7 1/8 9 1/8 +28 American Stores/Food, drugstores 49 1/2 62 1/8 +26 Amplicon/Computer lease 13 16 1/2 +25 UniCare/Insurance 9 11 1/8 +24 Silicon Systems/Elect. components 9 1/2 11 3/4 +24 For Better Living/Diversified 10 1/2 12 3/4 +21 Cimco/Plastics 12 1/2 15 +20 Eldorado Bancorp/Bank 9 1/2 11 +18 First American Financial/Title ins. 24 28 +17 Community Psychiatric /Hospitals 19 7/8 23 +16 Westcorp/S&L; 6 6 3/4 +13 Micro D/Electronic dist. 8 1/2 9 1/2 +12 MAI Basic 4/Computers 13 14 +10 Transcon/Trucking 3 1/2 3 3/4 +7 American Business Phones /Phones 9 7/8 10 1/2 +6 Mercury S&L;/S&L; 8 8 3/8 +5 Wynn’s International/Auto parts 19 1/2 20 1/2 +5 Smith International/Oil drilling equip. 8 8 +3 Newport Electronics/Measuring inst. 4 5/8 4 1/2 -3 Printronix/Computer printers 10 9 5/8 -4 Datum/Electronic systems 5 4 3/4 -5 Viratek/Drug maker 16 3/4 15 3/4 -6 ReadiCare/Medical centers 1 7/8 1 3/4 -7 Fidelity National/Title insurance 6 5/8 6 -9 Odetics A/Robotics 6 5/8 6 -9 Pacific Scientific/Electronic inst. 13 3/4 12 3/8 -10 Odetics B/Robotics 7 7/8 7 1/8 -10 Comprehensive Care/Health Care 9 3/4 8 1/2 -13 Safeguard/Dental HMO 5 3/4 5 -13 ICN Pharmaceuticals/Drug maker 7 7/8 6 7/8 -13 Varco/Oil drilling equip. 3 3/4 3 -13 Amer. Health Services/Med. imaging 3 3/4 3 -13 National Health Care/Dental HMO 1/2 7/16 -13 EIP Microwave/Microwave counters 8 1/8 7 -14 Pacific Inland Bank/Bank 5 4 -15 Certron/Magnetic tape 2 1 7/8 -17 Luther Medical/Catheters 7/8 22/32 -18 Morehouse/Industrial machinery 1 1/8 7/8 -22 Archive/Tape drives 9 1/8 7 -23 Microsemi/Semiconductors 8 3/8 6 3/8 -24 Gateway Commun./Computer equip. 3 1/2 2 5/8 -25 Covington/Home bldg. 11/16 1/2 -27 Western Digital/Semiconductors 16 11 5/8 -28 AST Research/Electronics 11 5/8 8 1/8 -30 US Facilities/Insurance 4 2 3/4 -31 CMS Enhancements/Computers 5 1/2 3 3/4 -32 Provena Foods/Food products 5 3 -35 Clothestime/Retail clothing 8 1/2 5 3/8 -37 Centennial Group/Financial services 5 3/4 3 5/8 -37 PDA Engineering/Computer software 6 3 3/4 -38 Comarco/Defense engineering 5 3 -38 Hammond/Mortgage banking 6 3 3/4 -40 Petrominerals/Oil exploration 1 3/4 -40 Wespercorp/Computer equip. 5/8 3/8 -40 Ceradyne/Aerospace 6 3/4 3 7/8 -43 National Lumber/Home center 4 1/2 2 3/8 -47 Belcor/Holding company 25/32 13/32 -48 Resdel/Communications equipment 5 2 3/4 -48 Computer Automation/Computers 9 3/8 4 3/4 -49 Startel/Phone answering 7/8 7/16 -50 FileNet/Image processing 15 3/4 7 -54 EECO/Electrical systems 14 1/8 6 -56 Silvercrest/Mobile homes 4 7/8 2 1/8 -56 Distributed Logic/Circuit boards 5 2 1/8 -58 General Automation/Computers 3 1 3/8 -58 Biomerica/Diagnostic kits 2 3/16 -59 Quality Systems/Dental data sys. 2 1/2 1 -60 Diceon/Circuit boards 35 13 3/4 -61 Bomed/Medical equip. 2 1/2 15/16 -63 Applied Data/Computer products 3 3/8 1 -63 TS Industries/Building supplies 31 11/16 -97
Source: Newport Securities Corp.
