Valley Stock Winners, Losers Switch Places
The Eddie Murphy comedy “Trading Places” is a Hollywood rags-to-riches story about fortunes won and lost based on the vagaries of the commodities market.
Trading places, the home game, is a San Fernando Valley story about share prices gained and lost based on the vagaries of the stock market.
Among the stocks of nearly 70 publicly traded companies based in the Valley region, several that had been ignored, or pounded while investors courted tech last year came to the fore in the third quarter, which ended Friday.
And when the list was compiled of the top five Valley stocks for the period, there was not an Internet pure-play among them.
Meanwhile, some companies that had enjoyed soaring share prices earlier in the year had the dubious distinction of seeing the greatest share-price drop this quarter.
Whether it’s the revenge of the old economy or the continued tech wreck, consumer goods and health-related shares fared well during the period, while some of the technology-related firms that had posted strong gains early in the year tanked.
Topping the list of the Valley’s biggest gainers was THQ Inc., the Calabasas-based software maker that has parlayed the growing love of video games into a $447 million company. Shares of THQ, which fell more than 30% in the second quarter, rebounded and then some, gaining 90.77% for the just-ended period to finish at $23.25. In fact, THQ was in the biggest losers category among Valley stocks in both the first and second quarters.
On the flip side was optical components maker MRV Communications of Chatsworth. This once highflying company saw back-to-back gains of more than 45% in each of the first two quarters, and ended the second quarter as one of the top five gainers. For the third period, investors weren’t so kind, dropping the company’s share price by 32.62% to $45.31 and a position in the five biggest losers group this round.
(Because of the volatility of so-called penny stocks, the ranking of greatest gainers and losers includes only those shares that traded for at least $5 at the end of the quarter.)
“If you look at the stocks that did well in the third quarter, they’d be the ones that were out of favor at the beginning of the year,” said Doug Christopher, senior research analyst in the Los Angeles office of Crowell, Weedon & Co.
“Retailers, health care stocks, beverages. They were very depressed, then they started reporting earnings and their earnings were strong. Relative to the excessive valuations in the Internet stocks, they looked like good places to put your money in the near term.”
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In the No. 2 spot on the list of Valley gainers was Chatsworth-based North American Scientific Inc., which posted a gain of 77% for the quarter to end at $31.75.
The company, which makes radioactive “seeds” used in the treatment of prostate cancer, has gained 257.75% in the past 12 months, to put it among the highest gainers for the year.
Rounding out the top five were:
* Cheesecake Factory, a Calabasas-based specialty restaurant and bakery chain, which gained 57.27%, ending the period at $43.25;
* Insulin-pump maker MiniMed of Sylmar, which gained 51.48% to close at $89.38 (by far the highest share price on the list); and
* Athletic shoe maker K Swiss Inc. of Westlake Village, which was up 41.18% on the quarter, closing at $22.50.
“For the quarter, we’re touting the return to value,” said Tom Stevens, a senior managing director with Los Angeles-based Wilshire Associates.
He said he’s seen investors return “to companies that basically have good fundamentals and are making good products, as opposed to concept stocks that aren’t generating any profit.
“We’re observing that across the board, value stocks have come back in a big way.”
Miguel Iribarren, a research analyst at Los Angeles-based Wedbush Morgan Securities, noted that THQ posted fiscal ’99 earnings of $1.63 per share.
“That was an exceptionally impressive year,” he said.
THQ’s stock slipped in late May to a low of $7.63. But current anticipation of sales for Sony’s PlayStation 2 video game system, due to launch later this month, and Microsoft’s Xbox, due out next fall, have helped lift the company’s stock back up.
Overall, the quarter was fairly kind to locally based companies, with 36 of the firms showing share-price gains. Two were flat and 29 saw some share-price slippage.
In the downward-sloping group were some of the biggest names in the Valley, including Walt Disney Co., which dipped by 1.45% to close at $38.25; Newhall Land & Farming Co., which lost 11.25% to end the quarter at $23.52; and MRV Communications.
Seth Spalding, director of communications systems research for Epoch Partners, acknowledged that perhaps the valuations of some telecommunications stocks were a bit inflated earlier in the year. Overall, he said, such valuations tend to be based on a very rosy scenario. So any slowdown in sales sends investors scrambling.
He said telecommunications was among the hottest--and most volatile--sectors during the quarter. But investor concern about a decline in orders from major telecommunications carriers, “has taken some of the air out of the sector in the past few weeks,” which affected companies like MRV.
There were quite a few entertainment and technology shares in the minus category this quarter.
“Among the names that have performed the poorest, some you’re seeing are definitely victims of the tech wreck,” said Stevens.
Among the Valley companies seeing the biggest drops in share price were:
* Woodland Hills-based Vertel Corp., a telecommunications software maker that saw its price drop by almost half--47.14%--to close at $9.25.
* MRV, which had the second greatest share price drop;
* Tekelec, a Calabasas-based telecommunications company, which was down 31.78% to $32.88;
* Dick Clark Productions, a Burbank-based television production company that slid 23.40% to $9 despite its report earlier this month that revenue nearly doubled to $27.5 million for the company’s fourth quarter; and
* Woodland Hills camera maker Panavision, which lost 15.91% to close at $6.94.
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Cyrus Irani, president and chief executive of Vertel, said he had “no explanation to date for the stock price gyrations” for his company, which is trading at a fraction of its 52-week high of $51.94.
He noted that Wall Street responded favorably late last year to its new telecommunications connectivity software, e*ORB.
“There are a lot of tech stocks that move based on momentum,” he said. “And our observation is that that may be the case here.”
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Valley@Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.
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Biggest Gainers and Losers
San Fernando Valley-area public companies whose shares traded at or above $5 on Sept. 29
