AFTER THE ELECTION : O.C. Firms Sense Opportunity Knocking in Clinton Victory : Economy: Analysts say environmental, engineering, education and some health companies could see rewards.
Even though President-elect Bill Clinton didn’t carry Orange County, companies here were looking Wednesday to catch the coattails of a new Democratic agenda.
Analysts say environmental, engineering, education and some health companies could see financial rewards from greater government activism in everything from cracking down on polluters to mandating worker retraining.
Some company executives also predict that the Democratic victory will bring an uptick in consumer and business confidence because of the prospect that Clinton will move quickly to present Congress with a stimulus package.
“There’s going to be an atmosphere of hope and a surge of positive thinking,” said Roger W. Johnson, chairman of Western Digital Corp., who attended Clinton’s election-night victory party in Little Rock, Ark. “I see the economy stabilizing. And I hope that he sends signals immediately to the banking system to free up some capital.”
In general, the day after the election was lackluster on Wall Street.
Western Digital’s stock, for example, fell 12 cents a share to close at $6.88 in trading on the New York Stock Exchange.
Larry Friend, president of L.H. Friend, Weinress & Frankson Inc., an Irvine investment bank, said: “The market is sort of treading water right now. But now that the election is over, you’ll see reality set in once everyone realizes how much has to be done.”
Pundits, however, are already pointing to Fluor Corp., the Irvine engineering and construction giant, as a Wall Street gainer. Its chairman and chief executive, Leslie McCraw, appeared on CNN’s “Moneyline” Wednesday to talk about the new Administration. Fluor’s stock gained 88 cents a share to close at $45.88 in trading on the New York Stock Exchange.
Fluor could benefit from stepped-up federal efforts to clean up nuclear facilities, as well as from a government push for more environmentally conscious designs for factories, chemical plants and chemical products.
“There will be companies that will step up their response to what’s on the books,” McCraw said. “Not that they are not complying, but there will be an increased commitment.”
Smaller environmental firms also foresee the Clinton Administration stepping up enforcement of legislation, including the Clean Air Act.
“The regulations are going to be tightened up,” said Henry Huta, president of Wahlco Environmental Systems in Santa Ana, which makes air- and water-pollution control systems.
“We will do better faster.”
Wahlco’s stock gained 38 cents a share to close at $7.63 in Wednesday’s trading on the New York Stock Exchange, even though the company reported a $3.2-million loss for the third quarter.
Shares of Metalclad Corp., which is involved in industrial insulation, asbestos removal and hazardous-waste processing, have for months been stable in a bear market, in part because of election prospects. The stock closed unchanged at $4 in Wednesday’s NYSE trading.
“That’s been a real benefit,” said Elgin Williams, the company’s director of investor relations. Even so, he said, the Clinton effect on the company’s fortunes is likely to be minimal because Metalclad has a large share of its contracts in Mexico.
Clinton’s call for worker retraining is a potential windfall for National Education Centers in Irvine, which provides vocational training courses and other education services. NEC’s stock rose 25 cents to $7 on the NYSE.
In his victory speech, Clinton mentioned a proposal to require companies with 50 or more employees to spend 1.5% of their payrolls on continuing education and retraining. NEC could be a contractor for large companies that need everything from courses to textbooks for their employees.
“It seems every aspect of their business could stand to gain,” said Jeffrey Kilpatrick, president of the brokerage Newport Securities in Costa Mesa. “Clinton has made a big deal out of retraining.”
Orange County’s medical companies, which have been struggling to slow spiraling health care costs, will probably not feel any immediate effect unless the Clinton Administration makes some dramatic moves, industry executives and analysts said, and that is not likely to happen.
“It is such a complex industry, I am not sure we can do anything that will be considered dramatic in the next four years,” said Terry Hartshorn, chief executive for PacifiCare Health Systems Inc. in Cypress. The company’s stock fell 25 cents to $42.75 in Wednesday’s NASDAQ trading.
The consensus is that health-maintenance organizations, biomedical and biotechnology manufacturers will fare well under Clinton’s mandate to rework the health care system. Another major beneficiary will be medical-device manufacturers, who under research and development incentives will begin to develop new technologies, providing jobs and health to the country.
But Vivian Wohl, an analyst with the brokerage Robertson Stephens in San Francisco, pointed out that the losers in the proposed health care system could be private physician and pharmaceutical companies, which fear that the Clinton plan would mean price controls on drugs.
“Many of the (independent) health care providers are in trouble,” Wohl said, suggesting to investors that “managed care is the place to be.”
For ICN Pharmaceuticals Inc., the international drug conglomerate based in Costa Mesa, the concern centers more on what Clinton’s foreign policy will be for Eastern Europe. The company has bet its future growth on the bloc of former communist countries.
“We hope that Mr. Clinton will continue to maintain good relations with Eastern Europe, where democracy is beginning to flourish and free enterprise is beginning to take hold,” said Chief Executive Adam Jerney, who succeeded ICN’s founder Milan Panic when he accepted the premiership of war-torn Yugoslavia.
One move that Clinton might make would dramatically change the health care industry: sponsor legislation that would require recipients of Medicare and Medicaid to join an HMO as a prerequisite for receiving benefits. That would help companies such as PacifiCare and Fountain Valley’s FHP Inc. FHP’s stock was up 25 cents a share to $19 on the NYSE.
“It is a very pro-managed care concept,” said Nick Franklin, FHP’s vice president of governmental affairs. “We’re positioned very well to respond and to be very proactive in the new Administration.”
O.C. Stocks: What Clinton Presidency Could Mean
Gov. Bill Clinton touched on several themes during his campaign: technology, the environment, managed health care and rebuilding the infrastructure. As Clinton gained in the polls and his election seemed likely, investors began to anticipate which companies might benefit from his presidency. As a result, several Orange County firms have seen their stock prices steadily increase since the Democratic National Convention. HIGH-TECH: Company: Western Digital, Irvine Employees: 6,509 total; 1,580 in Orange County Wednesday’s Close: $6.88
Democratic convention: $4.63 Republican convention: $4.50 Perot re-enters race: $5.00 Election Day: $7.00
ENVIRONMENTAL: Company: Wahlco Environmental, Santa Ana Employees: 800 total; 120 in Orange County Wednesday’s Close: $7.63 Democratic convention: $7.38 Republican convention: $6.00 Perot re-enters race: $4.75 Election Day: $7.25
HEALTH CARE: Company: PacificCare, Cypress Employees: 1,600 total; 1,300 in Orange County Wednesday’s Close: $42.75 Democratic convention: $27.25 Republican convention: $34.50 Perot re-enters race: $39.00 Election Day: $43.00
INFRASTRUCTURE: Company: Fluor, Irvine Employees: 20,000 total; 3,200 in Orange County Wednesday’s Close: $45.88 Democratic convention: $38.38 Republican convention: $40.88 Perot re-enters race: $42.63 Election Day: $45.00
Sources: Companies listed; Bloomberg News; Dow Jones News Retrieval; Los Angeles Times Orange County Editorial Library
Researched by DALLAS M. JACKSON
