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Local Stocks Turned In a Poor Performance in ’94 : Investing: Recession, quake helped push regional index down 5%. But communications equipment makers bucked the trend.

SPECIAL TO THE TIMES

Nineteen ninety-four will be remembered as a poor year on Wall Street, with most national stock indexes down slightly, but it was an even worse year for local stocks.

The composite index of 107 stocks in the San Fernando, Santa Clarita and Conejo valleys dropped 5% during 1994, according to Media General Financial Services, a Richmond, Va., firm that compiles the list for The Times. That’s a bigger drop than all but one of the major national stock indexes, reflecting the strain on Valley-area companies from the long California recession and the Jan. 17 Northridge earthquake.

The quake hit insurance companies particularly hard, especially 20th Century Industries, which suffered an estimated $900-million loss from quake-related claims and turned in one of the poorest showings among local stocks for the year.

By contrast, the Dow Jones Industrial Average of 30 blue chip stocks gained 2.1% in 1994, while the Standard & Poor’s 500 Index, a benchmark of many of the nation’s largest companies, fell by 1.5%. And the Nasdaq composite index, a broad measure of small-company stocks, fell 3.2% for the year.

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The Valley index was dragged downward by the overwhelming number of stocks that lost value. Of the 99 stocks that traded all year, 35 gained in price, 62 declined and two remained the same.

Among the companies that did well, a common denominator was telecommunications. The three top performers in 1994 are all involved in making high-tech communications equipment.

Calabasas-based Tekelec, for example, the No. 1-performing local stock in 1994, makes switching devices that transfer signals for telephone calls and check calling card numbers. Tekelec’s stock began 1994 trading at $5.75 per share. By year’s end, the stock price had climbed 472%, closing at $32.88.

The change marks a sharp reversal--Tekelec was one of the area’s biggest stock losers the previous year. Plagued by continuing losses, the company laid off 50 workers at the end of 1993 and cut its overhead by 25%. That, plus a surge in new orders, pushed the company back into the black. For the first nine months of the year, Tekelec’s earnings were $2.36 million compared to a loss of $9.96 million the previous year, and revenues grew by 20% to $42.4 million.

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Another strong performer, MRV Communications Inc. of Chatsworth, apparently has found a niche providing technology for expanding fiber-optic cable networks. New orders for the company’s fiber-optic and semiconductor products flowed in during 1994, doubling both sales and earnings in the first nine months of the year.

During that period, earnings were $1.04 million, up from $522,000 in the first three quarters of 1993, and revenues were $11.3 million. The company recently announced AT & T will start distributing its products. Wall Street has been responsive: MRV’s stock, which traded at $4.63 per share at the beginning of the year, rose 162% by the end of 1994, closing at $12.13.

And the fast-changing telecommunications business also was the ticket to success for Woodland Hills-based Incomnet Inc., which staged a turnaround similar to Tekelec’s in 1994. For the first nine months of 1994, Incomnet’s profit was $2.63 million compared to a loss of $1.27 million in the same period a year earlier. Revenues in the first three quarters were an impressive $30.7 million compared to $6.23 million last year, thanks to growth in a subsidiary, National Telephone & Communications Inc. Incomnet’s stock rose 113%, from $6.25 to $13.31, during the full year.

The worst-performing local stock in 1994 was Simi Valley-based Golden Systems, a computer parts company founded by Jay Tandon, the younger brother of the man who founded now-bankrupt Tandon Corp. Golden Systems was already reeling from a tough year when it was hit by especially bad news in the tail end of 1994: Compaq Computer, its largest customer, said it found quality problems in a batch of the power supplies Golden Systems makes and promptly sent them back.

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The news came shortly after the company posted a $2.38-million loss on revenues of $7 million in the third quarter. The stock price, which had been sinking fast anyway, abruptly plunged. When the dust cleared, the company’s market value had dropped 93% to close the year at 63 cents per share.

Sherman Oaks-based House of Fabrics Inc. was another big loser in 1994, a victim in part of the poor local economy in recent years. The retail fabric and sewing-supply store sought protection under Chapter 11 of the bankruptcy code in November, following a long year of cost-cutting, layoffs and store closings. The company had lost $86.3 million for the first three quarters of the year on a 21% decrease in revenue to $315 million. House of Fabrics’ stock, meanwhile, sank 84% to close the year at $1.25 per share.

The California recession, however, can’t so easily explain the slide of two high-tech companies that might be described as novelties, Styles on Video Inc. of Canoga Park and Iwerks Entertainment Inc. of Burbank.

Styles on Video, which sells computer systems to beauty salons that let customers view their own image with different haircuts, announced that a class-action lawsuit had been filed against the company alleging violations of federal securities laws in December. The American Exchange halted trading of the stock shortly afterward, not before the stock had dropped considerably, however. It finished the year at $2.81 per share, 84% below the year’s starting price.

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Iwerks, which is attempting to exploit the new frontier of virtual-reality entertainment with its theaters and games, was one of 1993’s hottest offerings.

But although Wall Street loved Iwerks’ futuristic trappings at first, hopes quickly soured as the company’s sales repeatedly failed to meet expectations. So Iwerks’ stock plunged 82%, from $26.75 to $4.75, by year’s end.

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10 Biggest Regional Stock Winners for 1994

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Closing Percent price on change for Stock 12/31/94 the year Line of business Tekelec $32.88 +472 Communications MRV Comm $12.13 +162 Communications Incomnet $13.31 +113 Telecommunications Special Devices $16.38 +111 Automotive Benton Oil & Gas $9.13 +83 Energy Health Systems International $30.38 +80 Medical care Datametrics CP $5.00 +74 Computer printers Leslie’s Poolmart $13.25 +59 Pool supplies On Assignment $16.00 +52 Personnel Pay Fone Sys $4.25 +51 Payroll services

Note: Excludes stocks whose Dec. 31, 1993, price was below $2 a share

Source: Media General Financial Services Inc., Richmond, Va.

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10 Biggest Regional Stock Losers for 1994

Closing Percent price on change for Stock 12/31/94 the year Line of business Golden Systems $0.63 -93 Computer power supp. House of Fabrics $1.25 -84 Sewing supplies Styles on Video $2.81 -84 Imaging systems Iwerks Entertainment $4.75 -82 Specialty theaters Citadel Holding $2.50 -79 Savings & loan American Mobile Systems $4.25 -72 Communications New Image Industries $4.13 -71 Imaging systems Syncor International $7.00 -69 Pharmaceuticals 20th Century Industries $10.50 -62 Insurance Voice Powered Technologies $1.88 -58 Electronics

Note: Excludes stocks whose Dec. 31, 1993, price was below $2 a share

Source: Media General Financial Services Inc., Richmond, Va.

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