Investors Put Stock in Broad Market
When the spotlight is off the star performer, it’s easier to see the other hoofers dancing their hearts out, way back in the chorus line.
The same can be said for several San Fernando Valley area publicly traded companies in the wake of the recent tech wreck that took some of the dazzle away from the technology sector stars.
For the quarter that ended June 30, tech-related companies had to share center stage with firms in bread-and-butter industries like health care and banking.
The upshot, experts say, is a broader mix of firms enjoying healthy stock-price gains, while investors shift their gaze to companies with steady earnings and fiscal fundamentals.
“We weren’t getting a lot of respect until the real high fliers stopped flying so high, and investors started looking at some of these companies with real earnings growth,” said Michael Mikity, senior vice president and chief financial officer of Woodland Hills-based Syncor International Corp.
The 25-year-old company, which sells a radioactive imaging agent used in stress tests, posted the largest share price gain of the 70 area companies tracked by The Times.
With a gain of 118.18%, it was the only firm in the group to double its share price--a big switch from this year’s first quarter, in which all five of the top-ranked companies posted gains of at least 100%, and one went as high as 577%.
With the dot-coms not quite so darling this quarter, “What you’re actually seeing is that some health care stocks that had earnings are being positively affected,” Mikity said.
Even without triple-digit growth in returns, some Valley firms still posted impressive gains for the quarter compared with the broader market, according to Emily Straw, senior associate at the Los Angeles investment firm Wilshire Associates.
“When I look at this list I see some pretty outstanding returns, given that the market’s return for the quarter was a negative 4.3%,” said Straw, who reviewed the list of firms for The Times.
Next in line after Syncor was Foundation Health Systems, a Woodland Hills-based health insurer, which posted a gain of 74.22%.
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Highland Federal Bank boasted the third-largest gain (62.50%), with the news coming on the heels of a May announcement that the company will be acquired by a subsidiary of Michigan-based Jackson National Life Insurance Co.
ACT Networks Inc., the Calabasas-based maker of networking equipment, gained 51.23%. It too is about to be acquired--by Clarent Corp. of Redwood City, whose equipment allows voice, faxes and data to be transmitted simultaneously over the Internet.
Rounding out the top five was Chatsworth-based MRV Communications Inc., a maker of switching and routing equipment for computer networks. It gained 46.79%, giving the company some good news to counter reported losses of $5.8 million, or 21 cents per share, in the first quarter.
(The ranking of greatest gainers and losers includes only those shares that trade for $5 or more.)
“There were some strong companies that hadn’t been recognized because they weren’t part of the dot-com utopia or Nasdaq’s wild party,” Straw said. “Now, there’s a broadening in the market. Investors are seeking opportunities that have positive earnings and can provide growth at a reasonable price.”
The shakeout in the technology sector, which helped the Nasdaq shed 13.27% for the quarter, weighed down the shares of a large number of Valley companies as well.
In the first quarter, 27 of the 73 companies in the group (or 37%) saw their share prices drop.
For the just-ended quarter, 48 out of 70 firms (or nearly 70%) saw a drop, including some household names like the Walt Disney Co. (down 6.36%); MiniMed (down 8.8%) and Dole Food Co., whose share price fell by 18.18%.
And for anyone who doubts that fame is fleeting, just compare last quarter’s winners and losers with the roster for the first quarter of 2000. Essentially, the two sides traded places.
Four of the five companies that posted the greatest gains early in the year--Vertel Corp., Brilliant Digital Entertainment, DCH Technology Inc., and North American Scientific Inc.--all lost ground in the just-ended quarter.
In fact, so much of the gleam came off Brilliant’s share price that the company posted the fourth-greatest loss among Valley-area companies in the second quarter. And DCH posted the eighth greatest loss. Both were trading in the penny-stock territory (under $5 per share) at quarter’s end.
At the same time, Foundation Health and Highland Federal, which had endured first-quarter drops, moved center stage in the second quarter.
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The five firms that suffered the largest share price drops in the second quarter were:
* Coyote Network Systems Inc., which lost 52.27%. The Westlake Village-based company provides international and domestic long-distance services.
* Flamemaster Corp., a Sun Valley company that makes and sells flame-retardant coatings and sealants. It was down 45.87%.
* Unova Inc., a Woodland Hills-based maker of automated data-collection systems, which slumped by 45.83%. The company has posted earnings declines in each of the past five quarters.
* Rexhall Industries Inc., a Lancaster-based maker of motor homes, which lost 43.75%.
* THQ Inc., which is making a second straight appearance in the “greatest losers” category. Shares of that company dropped 31.8% in the quarter.
More than 60% of the shares that lost ground during the quarter trade in or near penny-stock territory.
Alexander G. Hoffman, a financial analyst with Toronto-based Modern Strategies Inc., concedes that the quarter was “slow” for the penny sector, but he attributes the downturn to the lure of travel rather than the lost allure of tech.
“The penny stock market was very, very slow. Volumes tended to be low, largely due to the weather,” said Hoffman, whose company’s Web site, www.pennystockinsider.com, tracks that market segment. “Penny stocks tend to be cyclical, depending on the weather.
“Penny stocks need more daily monitoring because they tend to have bigger price swings. So in the summer, the traders aren’t at their computers every day keeping track of their stocks.”
Add to that, market uncertainty because of the tech fallout, and increased interest rates courtesy of the fed (making a company’s debt load that much weightier) and you have more slumping shares, experts said.
Both Hoffman and Straw said they expect a stronger market as the year wears on.
Part of that strength, according to Straw, will come from investor movement beyond technology.
She likened the previous tech-dominated market to a table held up by just one leg.
“I feel the prospects are good for the second half,” of the year, she said, “because of the broadening out. There’s more legs under the table now. It’s nice to be at a table with two or three more legs.”
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Valley@Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.
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2nd-Quarter Stock Scorecard
San Fernando Valley-area companies ranked by their April 1 to June 30 performance.
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Source: Bridge Information Systems
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Biggest Gainers and Losers
For San Fernando Valley-area public companies whose shares traded at or above $5 on June 30.
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2nd Quarter
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Biggest Gainers Company June 30 close 3-month % gain Syncor Int’l $72 118.18 Foundation Health $13.94 74.22 Highland Fed. Bank $24.38 62.50 ACT Networks Inc. $15.31 51.23 MRV Communications $67.25 46.79
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Biggest Losers Company June 30 close 3-month % loss Coyote Network $5.25 --52.27 Flamemaster $7.38 --45.87 Unova $7.31 --45.83 Rexhall Inustries $5.06 --43.75 THQ $12.19 --31.82
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Source: Bridge Information Systems
