Most of Region’s Stocks Decline : Indexes: The second-quarter drop is an about-face to the strong showing in the first quarter. The performance reflects the broader market.
The wellspring of optimism that lifted Valley stocks early this year virtually ran dry in the second quarter.
Shares of three out of four companies in the San Fernando Valley region fell in the quarter that ended June 30, and nearly half lost 15% or more of their value. The pullback was an about-face to the stocks’ strong showing in the first quarter, when 62% of them moved ahead.
The locals’ performance generally mirrored the lackluster showing of the broader market in the latest quarter, in which the NASDAQ Composite Index fell 6.7%, while the Standard & Poor’s 500 Composite Index inched up 1.1% and the Dow Jones average of 30 industrials gained only 2.6%.
An index of the region’s stocks, compiled for The Times by Media General Financial Services of Richmond, Va., showed a 3.8% gain for the second quarter despite the 3-to-1 ratio of losers over gainers.
That’s because the regional index is weighted according to each stock’s market capitalization, or the combined market value of all of its shares. And in the latest quarter, gains by such richly capitalized stocks as General Motors Corp. and GM’s Class H shares--representing the auto maker’s GM Hughes Electronic Corp. unit--lifted the overall index.
Otherwise, the investor skittishness that’s pervaded Wall Street lately is evident in the long list of declining issues of local companies--those headquartered in, or with a major presence in, the area from Glendale to Ventura.
Out of the 90 regional stocks tracked by Media General, 67 fell in the quarter while only 19 advanced. Four were unchanged: Amwest Insurance Group, Fortune Petroleum Corp., Glenfed Inc. and Leslie’s Poolmart.
Investors are decidedly unsure these days about whether the economy’s rebound, on which they bet heavily in the first quarter, is still taking root. Also, corporate announcements of disappointing profits continue to unsettle investors, and some analysts see the three-way presidential race as sending many would-be stock buyers to the sidelines.
Not that investors have given up on the economic recovery, of course. The gains by GM (and other auto makers) signal that investors continue to hope that the recovery--aided by recent interest-rate cuts--will expand and reward the so-called “cyclical” stocks, such as the auto and paper issues, whose fortunes are seen directly tied to the economy.
General Motors finished the second quarter at $44 a share, up 20%, and helped make autos the top-performing industry group as measured in Dow Jones & Co.’s national Equity Market Index.
But while investors hope for a longer-term recovery, they had little patience for local companies with current earnings troubles.
An example came from Pinkerton’s Inc., the giant security-guard company based in Van Nuys. The company said its second-quarter results would be significantly below corporate targets because of “recession-related cost cutting” by its clients. Result: Pinkerton’s stock ended the quarter with a 43% drop, to $15.50 a share.
The same applied to CII Financial Inc., a Burbank-based provider of workers’ compensation insurance and whose stock ranked among the 10 biggest losers for the second consecutive quarter. The stock closed the latest quarter at $3.25 a share, down 42%.
In mid-May, CII posted a $26.4-million first-quarter loss and indicated that a major improvement is not coming soon. The company, which is moving its headquarters to Pleasanton this month, also said in mid-June that it had begun a share-buyback program, but that step was unable to prevent the stock’s decline for the quarter.
Meanwhile, Vitesse Semiconductor Corp., a Camarillo-based semiconductor maker whose stock jumped 49% in the first quarter, drifted back down 45% in the April-June period, to $8.75 a share.
Then in just one session last Thursday, the stock plunged 50%, to $4.75 a share, after the company disclosed that it might report a loss for its fiscal third quarter that ended June 30. Vitesse, which posted a $1.1-million profit for the six months that ended March 31, said lower revenue from the Japanese market contributed to the setback.
Coincidentally, poor Japanese sales also were cited by Tekelec for its prediction that its second-quarter profit will be less than “previously anticipated.” The stock of Tekelec, a Calabasas maker of telecommunications testing equipment, skidded 22% during the quarter, to $13.50 a share.
HemaCare Corp. was another regional stock that suffered an abrupt setback after being among the area’s strongest performers early this year. The stock, which led the region’s first-quarter gainers with a 95% surge, suffered a 41% drop, to $6.25 a share, in the latest period.
Shares of the Sherman Oaks provider of blood-related services have been volatile this year, partly because of investor interest in HemaCare’s work on a proposed plasma therapy that could help treat AIDS victims. In the meantime, HemaCare has been trying to maintain profitability. In May, it announced $21,000 in earnings for the first quarter that ended March 31, compared with a year-earlier loss of $209,000.
The region’s biggest loser was Beverly Hills Fan Co., a maker of ceiling fans that’s actually based in Woodland Hills. During the quarter its stock tumbled 59%, to $1.06 a share, which was somewhat odd considering that the company’s profit and revenue for the quarter that ended April 30 both more than doubled from a year earlier, to $140,000 and $2.9 million, respectively.
But stocks of other companies that achieved improved results drew quick rewards from investors.
The area’s top gainer in the second quarter was New Image Industries Inc., a Canoga Park-based developer of computerized imaging systems that enable dentists and other professionals to show clients “before” and “after” images of their services. New Image’s stock jumped 72%, to $6.88 a share.
After hobbling through several quarters, New Image enjoyed a $600,000 profit in this year’s first quarter, compared with a year-earlier loss of $2.4 million, and its revenue soared to $4.5 million from $1.8 million.
Terminal Data Corp. has yet to move itself solidly in the black, but the Moorpark supplier of document-imaging systems has continued to narrow its losses in recent quarters, and for that investors pushed its stock up 33% in the second quarter, to $3.50 a share.
In the six months that ended March 31, Terminal Data lost $458,000, compared with a year-earlier loss of $1 million. The company also has announced several contract awards recently, including one from the U. S. State Department worth at least $7.5 million over five years.
Also among the gainers were two auto insurers, Zenith National Insurance Corp. and 20th Century Industries Inc., both based in Woodland Hills. Zenith National’s stock rose 17%, to $19 a share, and 20th Century’s climbed 16%, to $22.25.
10 Biggest Regional Stock Winners for 2nd Quarter
Closing Price on Percent Stock 6/30/92 Change Line of Business New Image Industries $6.88 +72 Computer imaging Terminal Data $3.50 +33 Imaging equipment Pay-Fone Systems $3.75 +25 Data processing General Motors H $25.88 +25 Aerospace Datron Systems $10.50 +24 Communications General Motors $44.00 +20 Autos Zenith National $19.00 +17 Insurance 20th Century Industries $22.25 +16 Insurance Perceptronics $2.25 +13 Simulators Spear Financial $5.63 +10 Financial services
Note: Excludes stocks whose March 31, 1992, price was below $1.50 a share Source: Media General Financial Services, Inc., Richmond, Virginia
10 Biggest Regional Stock Losers for 2nd Quarter
Closing Price on Percent Stock 6/30/92 Change Line of Business Beverly Hills Fan $1.06 -59 Ceiling fans Live Entertainment $1.63 -53 Entertainment Vitesse Semiconductor $8.75 -45 Semiconductors THQ $4.38 -45 Video games Matthews Studio Equip $2.75 -45 Movie equipment 3-D Systems $1.06 -44 Product modeling Pinkerton’s $15.50 -43 Security services CII Financial $3.25 -42 Insurance With Design In Mind $1.53 -42 Novelties HemaCare $6.25 -41 Medical services
Note: Excludes stocks whose March 31, 1992, price was below $1.50 a share
