Dow Surge May Bolster Some Market Players : Market: But the old pros may interpret it to mean that there is investor confidence that the recession will end down the road, analysts say.
Orange County stockbrokers and investment counselors say that the Dow Jones industrial average’s crossing of the 3,000 barrier Wednesday might have some psychological impact among amateur investors, but it won’t mean much to the pros.
“It’s just a point the moms and pops are looking to,” said Dave Berman, vice president of investments for Bateman Eichler, Hill Richards’ office in Newport Beach. “To a professional, the Dow Jones closing above 3,000 is a relative point. What’s important is that these higher stock prices can be translated into increased investors’ confidence that a recovery from the current recession is on the horizon by late 1991 or early 1992.”
Dave Almquist, a broker with Crowell Weedon & Co. in Newport Beach, said there are enough cautious investors waiting on the sidelines to drive the market even higher once their confidence in the country’s bruised financial system is more fully restored.
“There is a lot of caution, and I think that’s good,” Almquist said. “There’s still some pessimism about where this country is going to go, where’s it going to grow. But we’re seeing some real positive things happening.”
Two Orange County companies that made strong moves Wednesday were Fluor Corp., an Irvine engineering and construction giant, and Western Digital Corp., an Irvine computer-products manufacturer.
Western Digital stock rose 15% to $5.75 per share, up 75 cents, in heavy trading on the New York Stock Exchange. The company said it will ship at least $15 million worth of computer disk drives and microchips to Irvine personal computer maker AST Research Inc. in 1991.
Fluor stock was up $3 per share, or 4.6%, to $48.375 on the Big Board. There were reports Wednesday that some analysts were recommending the stock as a “buy.” The company has won several big contracts recently and is believed to be in line for possible lucrative contracts to rebuild Kuwaiti oil facilities damaged in the Gulf War.
Many smaller Orange County companies trade mostly on the over-the-counter market. Some of these stocks have moved up in price in recent months, and many are poised for sharper increases, according to Jeff Kilpatrick, president of Newport Securities Corp. in Costa Mesa.
“Quite a few Orange County companies have done a lot to lower overhead; they’ve reduced their break-even points,” Kilpatrick said. “Any kind of increases in sales downstream will leverage very aggressively” into higher earnings.
Marshall Nickles, a Pepperdine University economics professor and owner of an Irvine money-management company, said he expects the Dow Jones to go as high as 3,250 in the next two months, followed by profit-taking and a summer rally.
“We’ve invested since mid-November,” said Nickles, who runs Nickles Investment Advisory. “From a fundamental standpoint, I’d like to see earnings a little better than they are. But most bull markets come close to, if not at, the trough of a recession. And most pros think that’s where we are now.”
