Stocks of Regional Companies Register Mixed Results in 3rd Quarter : Market: Investors are pinning hopes on falling interest rates and looking for companies less sensitive to economic swings, experts say.
Stocks of regional companies put in a mixed performance in the third quarter, faring slightly worse than the market as a whole and well below the continued nationwide surge of small stocks, which gained smartly in the quarter.
In the three months that ended Sept. 30, a total of 38 regional stocks, or 54%, posted price declines or remained unchanged from the end of the second quarter. Meanwhile, 32 stocks, or 46%, gained in value in the third quarter.
Nationally, despite a still-sagging economy and no rebound in corporate profits expected in the near future, the Dow Jones Industrial Average rose 2.8% and the Standard & Poor’s 500-stock index increased 3.6% in the latest quarter. Small stocks, as measured by the NASDAQ composite index of over-the-counter issues, jumped 10.7% in the quarter.
Market experts say stock investors appear to be pinning their hopes on a continuing slide in interest rates that will spur the economy’s recovery. They also cite interest among investors in industries that are less sensitive to swings in the economy, and expect continued strength in the stocks of small companies, which have generally adapted better to a tough economy than larger concerns.
The survey of regional stocks covered companies with headquarters from Ventura to Glendale, and the data were compiled by Media General Financial Services of Richmond, Va. (Stocks valued at less than $1.50 a share on June 30 were not included in the survey.)
Everest & Jennings International Ltd., a Camarillo wheelchair maker, posted the biggest stock gain in the quarter. Its stock more than doubled to $3.50 a share from $1.63 at the end of the second quarter.
Investors were probably responding to some recent moves by the long-struggling company to shore up its weakened financial condition. Under a debt-restructuring agreement announced last month, which is still subject to shareholder approval, Everest & Jennings would reduce its debt by about $33 million.
The proposal would also raise the Everest & Jennings stake owned by Industrial Equity (Pacific) Ltd. from 30% to 53%. IEP is a Hong Kong investment arm of Brierley Investments Ltd., a holding company controlled by New Zealand investor Ronald Brierley. Also as part of the agreement, Robert G. Sutherland, head of IEP’s North American operations, has again become Everest & Jennings’ chairman.
Everest & Jennings has also agreed to sell its Ortopedia GmbH unit in Germany in a deal valued at about $58 million, and plans to sell its Camarillo headquarters and manufacturing plant in Camarillo and lease back the facility.
House of Fabrics Inc., a Sherman Oaks fabric retailer, saw its stock surge 52% in the quarter to $35 a share.
The company, which has been converting its stores from small shopping center outlets to “superstores,” reported that its profit in the second quarter that ended July 31 more than doubled to $1.55 million from $703,000 a year earlier on a 12% increase in sales to $98 million. It also recently acquired Fabricland Inc., a Portland, Ore.-based operator of 83 warehouse-sized fabric stores, bringing to 428 the number of fabric superstores owned by House of Fabrics.
Biotechnology powerhouse Amgen Inc. was the third biggest winner for the quarter, with its stock gaining 41% to $55.25 a share--after adjustment for a 3-for-1 stock split in September. The Thousand Oaks company has--by virtue of a series of court decisions--achieved a near monopoly on the nation’s best-selling biotechnology drug, an anemia treatment that is expected to bring in $400 million in sales this year.
On Monday, the U.S. Supreme Court declined to hear a case challenging Amgen’s patent for the anti-anemia drug. The decision was a blow to Amgen rival Genetics Institute Inc., which has waged a four-year battle to try to market its own version of the drug.
Meanwhile, Amgen is also outselling another competitor, Immunex Corp., by 6 to 1 in a marketing battle of new biotechnology drugs used to fight infections. Analysts expect annual sales of these drugs to reach $600 million.
A brewing battle for control of California Amplifier Inc. helped heat up the stock of the Camarillo maker of microwave amplifiers for satellite dishes and wireless cable systems. During the third quarter, California Amplifier shares rose 41% to $3 each.
In August, Colorado investor Charles W. Ergen, who owns 5.9% of California Amplifier’s stock, made a $12.5-million tender offer for the company. California Amplifier’s board recommended that shareholders reject the $3-a-share bid, and adopted a shareholder rights plan, a common takeover defense known as a poison pill.
Ergen’s offer was due to expire Monday, unless extended.
Investors have also taken note of Syncor International Corp., a Chatsworth operator of pharmacy centers that serve doctors and health-care facilities. Its stock increased 40% in the quarter to $21.75 a share.
As a result of growing sales of three new products for diagnosing heart disease, Syncor’s profit jumped 51% to $1.6 million in the fiscal first quarter that ended Aug. 31 from $1.07 million a year earlier, while revenues climbed 31% to $47 million.
American Ecology’s stock rose 37% to $17.75 a share. In June an Illinois judge dismissed a suit against the Agoura Hills waste management concern by the state of Illinois, which for years had sought to exact cleanup costs from American Ecology for an old, hazardous waste site in Sheffield, Ill. Illinois’ attorney general has appealed the ruling.
Also, in August, Ecol Partners Ltd. agreed to exchange $12 million of the $22.5 million in American Ecology long-term debt that the partnership held for 800,000 shares of American Ecology common stock. Ecol Partners is controlled by Harry J. Phillips Jr., a Houston investor who acquired a 52% stake in American Ecology in July for $16.6 million.
Despite troubled loan portfolios, local savings and loan stocks posted gains for the quarter. Glenfed Inc., the Glendale-based parent of Glendale Federal Bank, rose 30% to $7 a share. The thrift holding company reported a $137 million loss for the fiscal fourth quarter that ended June 30.
Among the stocks hardest hit during the quarter were those of companies that have reported or expect to report losses or sharp declines in profits.
The biggest regional loser for the quarter was New Image Industries Inc., whose stock fell 58% to $1 a share. The company said last month that it expects to post a loss for its fiscal fourth quarter that ended June 30 that will be “significantly greater” than $1.5 million. It also warned that it might have to reduce its operations if it can’t obtain additional financing.
The Woodland Hills-based company makes computer systems that generate before-and-after images for dentists, architects, beauty salons and others. But its revenues have been shrinking because of fewer sales of its beauty parlor systems.
Also in the third quarter, the state’s economic downturn hurt the stocks of several local banks.
CU Bancorp’s stock dropped 39% in the quarter to $5.50 a share. The Encino-based parent of California United Bank, which for years has produced steadily increasing profits, recently announced that it expects to post its first annual loss since it was founded in 1982. The loss is anticipated because of an additional $14 million in reserves that the bank has set aside to cover possible commercial loan losses.
Another bank holding company, Ventura County National Bancorp in Oxnard, was a big loser for the quarter, with its shares falling 38% to $4.50. The parent of Ventura County National Bank reported a 27% drop in its profit in the second quarter that ended in June to $592,000 from $814,000 a year earlier.
The profit decline, which the bank blamed on lower interest rates and higher operating costs, followed a 68% decrease in profits in the first quarter that ended March 31, when the bank increased its loan-loss reserves by $400,000.
Tandon Corp. in Moorpark saw its stock decline 37% to $2.06 a share. The personal computer maker’s profit plunged 78% to $1.36 million in the second quarter that ended June 30 despite a 16% increase in revenues to $112 million. Tandon attributed the profit decline to increased competition in the computer industry, a slowing worldwide economy, and the strengthening of the dollar versus foreign currencies. About 73% of Tandon’s revenues come from sales in Europe.
10 Biggest Regional Stock Winners for 3rd Quarter
Closing Price on Percent Stock 9/30/91 Change Line of Business Everest & Jennings $3.50 +115 Wheelchairs House of Fabrics $35.00 +52 Fabrics Amgen $55.25 +41 Biotechnology California Amplifier $3.00 +41 Electronics Syncor $21.75 +40 Pharmacies American Ecology $17.75 +37 Waste Disposal Pay Fone Systems $3.38 +35 Data Processing Matthews Studio Equip. $4.44 +31 Movie Equipment Glenfed Inc. $7.00 +30 Banking Datron Systems $15.25 +30 Communications
Note: Excludes stocks whose June 30, 1991, price was below $1.50 a share
Source: Media General Financial Services Inc., Richmond, Va.
10 Biggest Regional Stock Losers for 3rd Quarter
Closing Price on Percent Stock 9/30/91 Change Line of Business New Image Industries $1.00 -58 Computer Imaging CU Bancorp $5.50 -39 Banking Ventura County $4.50 -38 Banking National Bancorp Tandon $2.06 -37 Computers Networks Electronic $2.75 -35 Aerospace Rexhall $3.63 -31 Motor Homes Mortgage & Realty $2.00 -31 Real Estate H&H; Oil Tool $5.25 -25 Oil Services Perceptronics $3.75 -23 Automation Nu-Med $2.50 -23 Hospitals
Note: Excludes stocks whose June 30, 1991, price was below $1.50 a share
