Stock Ups & Downs : Entertainment, Biotechnology Lead Gainers, but Performance Lags Behind National Surge Fueled by Takeovers

1989 marked another extraordinary year for the stock market as the Dow Jones Industrial Average of 30 key stocks shot up 27%. But for about half the companies based in the San Fernando Valley, it was a year to forget.

In a survey of 70 public companies with headquarters from Camarillo to Glendale, compiled for The Times by Media General Financial Services of Richmond, Va., 34 stocks fell in value in 1989, one was unchanged and only 35 stocks gained ground. That performance contrasts sharply with the New York Stock Exchange, where more than two stocks gained in value for every one that declined in 1989.

Many analysts have noted the disparity in recent years between the stock gains by major companies compared to the relatively disappointing ones registered by smaller concerns that trade on the over-the-counter market. Part of the explanation is that the wave of big takeovers has attracted most investor attention, and many institutional investors tend to avoid smaller stocks.

Nevertheless, strong performances were turned in locally by a diverse group of companies, including those in the entertainment and biotechnology industries. About one-quarter of the stocks in our survey recorded better than 30% gains for the year, while poorer performing stocks included savings and loans and several companies tied to the defense spending cycle.

The biggest winner of the year was Software Toolworks, a Chatsworth company run by Les Crane, who was a late-night talk show host on ABC in the 1960s. Crane’s new company sells computer software and its best-known titles include the chess game “The Chessmaster 2100” and a typing course, “Mavis Beacon Teaches Typing.” The company’s stock nearly tripled in value last year, closing at $14.88 per share, as its profits and sales more than doubled in the first six months of its current fiscal year.

The poorest performer last year was United Education & Software, an Encino operator of trade schools whose stock collapsed, falling 94% to close at 22 cents per share, a tremendous free fall from its all-time high of $16.38 a share in March, 1988. The company closed out a bad year in a bad way when its primary subsidiary filed for Chapter 11 bankruptcy protection in December.

UES has endured two years of problems, including federal and state investigations of practices at a former student loan processing unit. And UES faces numerous shareholder lawsuits, as well as a $24-million consumer protection complaint filed in November by the state attorney general, who alleged that one of UES’ trade schools misled students and provided shoddy education.

Last year was also a grim one for much of the savings and loan industry, and Valley Federal Savings and Loan Assn. in Van Nuys had its share of struggles as the company’s stock nose-dived 76% to finish at $3.13. Many of Valley Fed’s problems stem from losses at its mobile home loan-making subsidiary; last fall the thrift took a $62-million write-off against earnings because of problems at the unit. And Valley Federal conceded in a recent Securities and Exchange Commission filing that it could be placed in receivership unless it improves its capital levels.

Another company on a forced march is Micropolis, the Chatsworth maker of computer storage devices called disk drives. That market is glutted with products, prices have fallen nearly 40% in the past three years, and production delays with some of Micropolis’ newer products haven’t helped the company’s fortunes. Last year Micropolis laid off about 100 of its 700 domestic workers, and in its latest quarter the company lost about $24 million on a 30% drop in sales. Analysts have said Micropolis’ survival is at stake, with the stock falling 53% last year to close at $3.50.

When Ronald Reagan left the White House, financial analysts warned it would mark the end of the military buildup of the 1980s, and last year was a rough one for many stocks tied to Defense Department spending. One concern in that category is TransTechnology, a Sherman Oaks aerospace company that, among other things, makes flares that jet fighters use to throw off heat-seeking missiles. Last year TransTechnology reported its first quarterly loss in 15 years and its stock declined 35% to close at $11.50 a share. But company chairman Arch C. Scurlock apparently is upbeat about the future. A group he heads has boosted its holdings in TransTechnology and now owns about 22% of the stock.

Nationally, takeovers helped fuel the stock market last year, and two local concerns saw their stocks climb for the same reason. Sierracin, an aerospace concern whose management has made a $15-a-share offer to buy the 52% of the company it does not already own, saw its stock more than double last year to close at $13.88. Sierracin’s shareholders are scheduled to vote later this month on the $30-million buyout offer.

Meanwhile, Syncor, a Chatsworth operator of high-tech pharmacy service centers, in September was the target of a $77-million buyout bid. But the deal was rejected by Syncor’s management and the offer lapsed. Still, it renewed speculation about another takeover bid for the company. For the year, Syncor’s stock gained 62% to close at $7.88.

1989 was also a strong year for the entertainment industry, and a trio of local entertainment stocks performed well. Walt Disney Co., the Burbank entertainment giant, saw its stock climb 70% to close at $112 per share. Last year Disney released several hit films, including “Honey, I Shrunk the Kids,” “Dead Poets Society” and “Turner & Hooch,” which generated about $300 million in ticket sales. In addition, the Disney-MGM Studios theme park opened in May at Walt Disney World in Florida. Last month, though, the company’s stock dipped $24 on worries that a slowing economy will cut vacation travel to the company’s theme parks.

MCA also enjoyed a run-up in its stock, closing up 37% at $62.25 a share. The entertainment concern had several big film hits last year, including “Back to the Future II,” “Sea of Love” and “Uncle Buck.” Sony’s purchase of Columbia Pictures last fall also increased takeover speculation about entertainment companies, including MCA. In recent years analysts have openly speculated about MCA’s future given the age of its chairman, Lew Wasserman, who is now 75.

A much smaller entertainment concern, Dick Clark Productions, saw its stock climb 69% for the year to close at $6.75. The Burbank production firm, run by veteran “American Bandstand” host Dick Clark, posted a $2.6-million profit for the year that ended June 30, after a $2.4-million loss the previous year. But the company’s profits sagged by 97% in its latest quarter, and last year “Bandstand” went off the air after 31 years.

Another big stock winner in the past year was Amgen, the Thousand Oaks biotechnology concern whose stock climbed 45% to close at $49. Last spring Amgen won government approval to sell its anti-anemia drug erythropoietin (EPO), which dramatically improves the energy level of patients suffering from kidney disease. EPO is Amgen’s first commercial product and the company has been selling the drug at the rate of $125 million a year. But in December Amgen’s stock started to slide after the company failed to win a clear-cut decision in an important EPO patent infringement lawsuit with a rival biotech company.

TOP 10 VALLEY AREA STOCK WINNERS FOR 1989

Closing Price on Percent Stock Dec. 29,1989 Change Line of Business Software Toolworks $14.88 +198 Computer Software ATI Medical 8.38 +124 Medical Equipment Sierracin 13.88 +114 Aerospace Walt Disney 112.00 +70 Entertainment Dick Clark Productions 6.75 +69 Entertainment Networks Electronics 6.50 +68 Aerospace Syncor 7.88 +62 Pharmacies Transworld Bancorp 16.88 +49 Banking Amgen 49.00 +45 Biotechnology American Magnetics 5.25 +40 Electronic Equipment

Note: Excludes stocks whose Jan. 1, 1989 price was below $2.50 a share.

Source: Media General Financial Services, Richmond, Virginia

TOP 10 VALLEY AREA STOCK LOSERS FOR 1989

Closing Price on Percent Stock Dec. 29,1989 Change Line of Business United Educ. & Software $0.22 -94 Trade Schools Valley Federal S&L; 3.13 -76 Banking Traditional Industries 2.75 -63 Photography Micropolis 3.50 -53 Computer Disk Drives Semtech 1.88 -50 Electronics Tekelec 8.50 -45 Telecomunications American Ecology 6.25 -36 Waste Disposal TransTechnology 11.50 -35 Defense Dataproducts 9.00 -33 Computer Printers Flamemaster 4.63 -31 Coatings

Note: Excludes stocks whose Jan. 1, 1989 price was below $2.50 a share