Bulk of Area Firms See Stock Price Dip

If you can apply the saying “misery loves company” to companies in misery, then the 51 Valley-based firms that saw their stock price shrink in the third quarter can take heart.

The rest of the state, and the nation, feels your pain.

An analysis of 79 publicly traded companies based in the San Fernando Valley tracked by The Times for this quarterly stocks report shows that 51, or nearly 65%, saw slippage in their share price during the quarter that ended Sept. 30. The average loss for the period was 24.54%.

If you add to that the companies whose share price was flat, that leaves only 22 firms, or just over 27%, with something to cheer about.

Among the losers were many of the Valley’s biggest and best-known companies, including Litton Industries, Walt Disney Co., Cheesecake Factory, Dole Food Co. and International House of Pancakes.

But analysts here and nationally said the down quarter was par for the course.

“That [65%] doesn’t sound that high to me,” said Greg Jones, chief economist with the respected Web site Briefing.com, which provides live market commentary. “It was a tough quarter.”

Analysts noted that indices across the board--from the Dow Jones industrials to the Wilshire 5000--headed south for the late summer stretch. The Dow closed down 5.78% compared with the second quarter, the Wilshire 5000 broad market index closed down 6.61%, and the Russell 2000 index of smaller stocks lost 6.64%.

Kevin McGowan, who tracks regional indices for Wilshire Associates, one of the largest investment management consulting firms in the United States, noted that 53% of the companies he tracks statewide suffered losses during the quarter.

When the quarter began, the market had to react to a June 30 hike in short-term interest rates by the Federal Reserve. Another hike followed mid-quarter, as the Fed edged rates up to try to head off inflation.

But the Fed activity gave the market the jitters, which affected a number of sectors with heavy concentrations in the Valley, including finance.

“The raising of rates was one of the negatives,” said Jones. “And Y2K [anxiety about the millennium bug] has been hovering out there as a concern, kind of a cloud over the market.

“There is more nervousness than usual at this time,” he said.

That’s not to say the news is all bad.

The technology sector remained strong: Four of the five Valley companies with the greatest gains in share price were technology-related, including biotech. In fact, all 10 of the companies with the greatest percentage gains for the quarter trade on the tech-heavy Nasdaq.

For the biggest gainers and biggest losers rankings in this quarterly stocks report, we included only companies whose share price exceeds $5. Stocks trading below that amount can show huge percentage swings with only a small change in dollar value.

The five companies with the greatest percentage gains in share price were:

* MRV Communications Inc., a Chatsworth-based company that designs and manufacturers computer networking products. Its share price grew by 80.48% during the quarter to lead the pack;

* THQ Inc., a Calabasas-based company that designs video games. It saw its stock price grow by 50%;

* Burbank-based Align Rite International Inc., which makes “photomasks,” used in the production of semiconductors. It gained nearly 36%;

* Insulin-pump maker MiniMed Inc., a biotech standout based in Sylmar that gained 27.70%;

* And the only non-tech entry in the top five, Westlake Village-based Right Start Inc., which shows the insatiable need of parents to buy more things for their children. That company gained 17.21% for the quarter.

MiniMed also took the prize for highest stock price. The firm’s $98.25 per share price at the end of the quarter was nearly four times that of entertainment giant Walt Disney Co., which ended the quarter with a share price of $26, down 15.62%.

Elsewhere in the entertainment sector, seven of nine local companies tracked by The Times saw double-digit dips in their share price, ranging from 14.41% at Burbank-based Dick Clark Productions to a 35.48% drop seen by Matthews Studio Equipment Group, also in Burbank. No local entertainment shares gained ground.

“Two sectors that are out of favor now are entertainment and financial services,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., pointing to market segments that are mainstays of the east and west sides of the Valley.

Kyser said the market continues to be disappointed with Disney, which is battling both slumping earnings and a sagging share price.

“You have the herd mentality,” Kyser added. “Everybody starts thinking Disney is bad, so all the entertainment companies are bad. Right now, it’s hard to find anybody that’s in favor, other than tech and net.”

But even in the beloved technology sector, the local companies were pretty evenly split between firms that showed share price gains and those that lost ground: Nine companies were up, seven down, one flat.

Dan Benson, a partner with the accounting firm Deloitte & Touche, said that’s a function of the Valley’s varied mix of tech companies.

“You’ve got everything in there from insulin devices to video games,” said Benson, who is based in the company’s Woodland Hills office. “What that really reflects is that we have a broad range of tech businesses in the Valley. If you look at other parts of the state, you might see a concentration,” of say, software or semiconductors.

If the tech group is varied, so is the list of companies that suffered the greatest declines in share price. They include:

* Dole Food Co. Inc., the Westlake Village-based food processor whose shares lost 35.32%;

* Matthews Studio Equipment, the Burbank equipment rental firm that lost 35.48%;

* Woodland Hills-based Foundation Health Systems Inc., one of California’s biggest health insurers, which lost 37.08%;

* ACT Networks Inc., the Calabasas-based company that makes computer networking equipment, which dropped 48.35%; and

* Workers’ compensation insurer Superior National Insurance Group Inc. The Calabasas-based company suffered the largest drop of the group, losing 48.39% for the period.

Why the slide? Blame everything from a banana glut to business restructuring.

“None of this is sector specific,” said Emily Straw, an associate in the equity division of Wilshire Associates. “The downside is across the board and the upside is limited to tech.”

Despite the turbulence of the quarter, 1999 for many companies has not been such a bad year.

Largely on the strength of an outstanding first quarter, many of the companies that were down for the quarter are up for the year that ended Sept. 30. Just 30 local firms were down for both periods.

“The fact that they’re up for the year is still a fairly good sign,” said Kyser of the LAEDC. “The economy is good, but a lot of sectors have taken hits.

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Valley @ Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.