Gold and Energy Push Amex Index to Record Values


While the NASDAQ market of mostly small stocks is struggling to top its February highs, the other small-stock market--the American Stock Exchange--is on a roll.

The Amex market value index Thursday rose 1.80 points to 438.93, its 17th new high this year. Since the end of 1992, the index has jumped 9.9%, compared to the NASDAQ composite index’s 4.1% rise and the Dow industrials’ 7.7% gain.

The Amex has been powered higher by soaring prices for its many small energy companies and small gold-mining companies--two industries that have captivated Wall Street this year as inflation worries have ballooned.


An Amex index that includes only natural-resources stocks has zoomed 29.4% since the end of 1992. One of the most active Amex stocks, Canadian gold firm Echo Bay Mines, has leaped to $12 a share from $4.875 on Dec. 31.

Another hot Amex stock: Dallas-based Energy Service Co., an oil and gas driller. Its shares have rocketed to $3 each from $1.125 at year’s end.

As Amex officials pointed out, however, their rally has been broader than energy and gold. Among the few household names that trade on Amex, toy maker Hasbro has risen 11% this year to $36.25 a share, and New York Times Class A shares are up 10% to $29.

Still, Amex can’t seem to shake its longtime image as a marginal market of “penny” stocks in high-risk fields such as mining and technology. As a place to trade, Amex for the last two decades has been sandwiched between the blue chip New York Stock Exchange and the fast-growing NASDAQ electronic system, the latter being the market of choice for leading technology companies.

Though Amex lists 965 individual stocks--about a fifth the number traded on NASDAQ--daily Amex trading volume is frequently just one-tenth or less that of NASDAQ.

That relative lack of trading action still scares off some money managers. “The liquidity on Amex is atrocious,” said Lawrence Auriana, manager of the New York-based Kaufmann Fund, which invests in small stocks. He said that Amex “specialists,” the individual traders responsible for keeping an orderly market in each Amex stock, won’t commit the capital needed for adequate control of volatility in the stocks.


Amex, naturally, disagrees. But, in the latest case of wild speculation in an Amex issue, little Andrea Electronics of Long Island City, N.Y., has seen its stock soar to $71.875 a share from $22.375 at year’s end.

Andrea has only 508,000 shares outstanding, and annual revenue of about $4 million. What has driven the stock is excitement over a patent Andrea received for a telephone noise-reduction system that it hopes to start producing later this year. The potential could be huge--but nobody really knows. That hasn’t stopped the stock from going to the stratosphere.

Of course, crazed speculation isn’t limited to the Amex. The NASDAQ market has had its share of stocks going from Earth to the moon--and, usually, back again. By definition, if you’re going to be home to up-and-coming companies, you must allow for a large number of disasters.

John Rogers, a well known Chicago-based small-stock manager who heads Ariel Capital, says there’s no reason for investors to assume that decent stocks are hard to find on Amex, despite the exchange’s often-cheesy image. Two of Rogers’ longtime Amex holdings are Hasbro and drug distributor Bergen Brunswig ($19.375 a share Thursday).

But small investors need to be especially careful with red-hot Amex stocks. “Short sellers,” traders who enjoy deflating high-fliers, seem particularly to enjoy picking off Amex companies that tout themselves as the next big thing.

Remember Go-Video? The Scottsdale, Ariz.-based firm’s shares a few years ago went as high as $24 on excitement over its Dual-Deck videocassette recorder, which allows duplication of prerecorded cassettes. But sales took far longer to develop than originally expected, and earnings still are minimal: The firm earned all of $122,620, or 1 cent a share, in the nine months ended April 30.


Go-Video jumped from NASDAQ to the Amex in 1990, but whether that helped the stock or hurt it is not clear. In any case, it now trades at $2.44 a share, one tenth of its all-time high price.

Amex on a Streak

The American Stock Exchange market value index has been hitting new highs, far outpacing most other broad stock indexes this year. Here’s a breakdown of the Amex market by industry group performance in 1992 and so far this year:

Amex indexes 1992 1993 Natural resources -12.4% +29.4% Housing/development +23.2% +12.2% Financial +12.0% +10.4% Retail +5.2% +8.2% Service +8.7% +7.1% Capital goods +1.3% +5.2% Consumer goods +14.8% -0.8% High-tech -15.2% -3.7% Market value index +1.1% +9.9%

Source: American Stock Exchange