Some of the stocks in the Dow...
Some of the stocks in the Dow Jones Industrial Average index have begun to weaken as the market faces the reality of higher interest rates on the horizon. Indicating that trend was the 30-year U.S. Treasury bond yield approaching 9%, its highest return in a year, said Irving Katz, director of research at Thomas Green/San Diego Securities.
Although most stocks of San Diego County-based firms have remained lethargic, some of the local issues that are institutional favorites have joined the downturn, Katz said.
Among the casualties was Price Co., which, after reporting flat second-quarter earnings, hit a new low of $34.25, off $3 for the week.
Other stocks following this sinking trend were Molecular Biosytems, down $2.25 at $16.875; Beeba’s Creations, down $1.875; DH Technology, down $1.625, and Mail Boxes Etc., down $1. HomeFed Corp, which as a financial stock has its own bear market to contend with, fell $1.375 to $27, where it sells at 4.8 times trailing 12-month earnings, a very low multiple, Katz said.
Great American Bank continued to move lower, dropping an additional $.875 as bears see little hope of the S&L; finding anyone willing to infuse the $350 million necessary to meet the stringent federal requirements by year-end. To survive, Great American will need a sale of assets or assistance from an outside bank or group of investors.
Magma Power dropped $2.25 for the week, despite reporting excellent first-quarter earnings of $.21 per share versus $.15 for the same period last year, a 44% increase. The stock is selling at an extremely high price-earnings multiple of 35 times last year’s per-share earnings. Another reason for the fall of Magma stock might be the registration of a 1-million-share warrant by J. P. Morgan to buy shares at $14 each. Morgan said it plans to exercise the warrant and then sell the shares.
An anomaly exists in the stock market’s recognition of the proposed merger of Triton Group Ltd. with Intermark. Triton Group recorded a new low of $9.625, even though the 1.4 shares of Intermark that Triton shareholders would receive in the deal would be worth $11.50 if the merger were to occur today. This seeming inconsistency shows that market inefficiencies still occur, Katz said.
The highlight of the week was the 1990 high made by First National Corp., up $2.625 to close at $21.50. This closing price was near its all-time high of $23.125, reached in 1989. The bank recently reported first-quarter earnings of $.40 per share versus $.33 and a book value, as of March 31, of $11.88 per share.
