Valley Brokers Ride It Out With Investors

A soothing voice is a big asset for any stockbroker. And on Tuesday, John Oppenheim, a Dean Witter Reynolds broker here, was using it all morning to give as much comfort as he could.

With the Dow Jones Industrial Average already down 150 points, one client told Oppenheim that he wanted to sell half of his $150,000 stock portfolio and put the cash in a money market fund.

Oppenheim, a broker since 1972, has worked through a stock market crash, six presidents and two OPEC oil price jolts. His investing mantra includes: Do what makes you sleep well at night, and make incremental investment steps.

So he told his client, let’s talk again at lunch. By then, the stock market had pulled a U-turn--it was edging up to a small gain for the day--and so had his client. He decided not to sell anything.

“We’re going to see some awfully nervous people,” Oppenheim said. In recent years, as many new investors have jumped into the stock market riding a rise in prices, “some people have been motivated strictly by greed. Now they’re encountering a new emotion called fear.”

Wall Street’s recent roller coaster ride has tested the nerve of many, especially in technology stocks.

One such victim is MRV Communications in Chatsworth, a maker of semi-conductor diodes used in computers and fiber optics. MRV’s stock lost another $3.50 a share Tuesday to close at $30. A year ago, MRV’s stock traded under $10 a share, then in late May it hit a dizzying, record high of $80.50, before nose-diving.

It used to be that MRV’s marketing Vice President Ken Ahmad never bothered to check his company’s stock price during the work day.

Not anymore.

“The only constant in the stock market is change,” Ahmad philosophized Tuesday. In terms of its growth and prospects, he said, MRV “is doing wonderful. . . . We just have to push and work as hard as usual.”

Earlier this year, he had sold some MRV stock to pay some bills. But at the latest prices, “it’s not even worth thinking about,” he said.

Another technology roller coaster ride has been Xylan Corp., a Calabasas computer switching company that went public earlier this year at $26 a share. On its first day of trading, Xylan doubled, then climbed as high as $76. But on Tuesday, Xylan’s stock closed at $40.625 a share, down 62.5 cents from the previous day.

“If you walk into work and the stock is at $40 or $65, it’s going to pretty much be the same” feeling in the office, contends John Mazzaferro, Xylan’s director of corporate marketing.

Mazzaferro said that he, and many others at the company, didn’t sell any of their stock during the spring run-up because “we believe we’re going to be a huge company a few years out. If we didn’t, we wouldn’t put in these kind of hours.”

All this Wall Street panic is what William Fleckenstein, who manages $20 million at Fleckenstein Capital in Seattle, has been waiting for. Fleckenstein makes his living as a short seller--he borrows shares of stock, sells them immediately, and agrees to return them later. If he can buy them back at a lower price, he makes money.

These days, he’s making money, and says his portfolio is up more than 40% in value so far this year.

“Stock prices had gotten completely out of hand. Anyone with the slightest knowledge of history knows this mania will end badly,” he said. He contends that Wall Street brokerage and mutual fund companies in recent years “sold the public a bill of goods. All they had to do was buy stocks and retire rich.”

Now when investors ask for their money back, he said, “a trickle becomes a flood.”

Fleckenstein has been shorting many technology stocks, including Micron Technology, an Idaho semiconductor company. Micron’s stock hit a high of $94 last year. “I shorted it at $80, $70, $50, $40 and $25,” he laughed, before recently covering his short position in Micron at $20.

Even on these chaotic days, though, it’s often forgotten that for everyone who sells some stock, somebody else is buying it.

As stock prices for some strong companies dipped, some investors took a chance to buy in. That seemed to happen with Walt Disney, the one local company among the 30 blue chip stocks that comprise the Dow Jones Industrial Average.

On Tuesday, Disney’s stock climbed $1.125 a share, and closed at $56.