Technical Wizards Find Magic in Prices

To many market mavens, technical analysts are Wall Street’s equivalent of the witch doctor.

With a vocabulary chockablock with stuff like “head and shoulders tops,” “rising wedges,” “dormant bottoms,” “inverted saucers” and other arcane gobbledygook, technical analysts are a mystery to most investors.

Unlike most analysts, technicians pay no attention to earnings, revenues, business prospects, balance sheets or any other indicator of the fundamental health of a company. All they care about is the overall movement of the market and a particular issue’s own trading history when evaluating a stock’s investment value.

“I just look at the price,” said Ralph Acampora, a Kidder, Peabody & Co. vice president and head of the firm’s technical analysis department, who recently took a look at movements of several Orange County-based companies.

One potentially attractive issue, Acampora said, is AST Research Inc., which has fallen from its recent 12-month high of $32.75 to a closing price Friday of $11.875 a share in over-the-counter market trading.

Though Acampora acknowledges that he knows nothing about the company, he said AST’s one-year low of $10.625 appears to be the support price below which it is not likely to drop. AST’s upward potential, he added, is about $14 a share, yielding a “not bad” profit.

Another possibly attractive stock, Acampora said, is Carl Karcher Enterprises Inc. Like AST, Karcher’s share price “had the glide pattern of a brick.” It eventually bottomed out at $12.625 a share. In over-the-counter trading Friday, it closed at $15.75 a share.

Just how much upside potential there is in a share of Carl Karcher remains unknown, Acampora said. Still, he thinks Karcher is worth a second look. “That stock may have turned a corner,” he said.

National Education Corp., which closed Friday at $17.625 a share, also looks as if it will soon turn a corner--the wrong one. “My recommendation is to sell,” said Acampora, who thinks National Education is likely to fall to $12 a share by the end of the year.

Traded on the New York Stock Exchange, National Education peaked at $23.375 earlier this year, but has been slipping recently on what Acampora said looks like “good old fashioned profit taking.”

MAI Basic Four Inc., which languished in the doldrums after its initial public offering earlier this year, remains an undervalued issue, according to Jean Orr, a computer industry analyst for Drexel Burnham Lambert Inc.

The Tustin-based computer maker was to have gone public at between $17 and $20 a share, before its underwriters decided the stock was really worth $15 a share. Shortly after its June initial offering, MAI hit a low of $11 a share on the NYSE, but recently has crept up somewhat to close Friday at $13.25 a share.

Orr said MAI should post $1.15 a share, or $16.4 million in net earnings for the fiscal year that ended Sept. 30. Those estimates represent a sharp gain over the 23 cents a share, or $3.5 million in net earnings, that MAI posted a year earlier.

The 1985 figures have been adjusted to reflect continuing operations and adjustments resulting from the leveraged buy-out by which current management acquired MAI in early 1985.

For MAI’s fiscal 1987, Orr estimates, the company will earn $1.55 a share, or $22.8 million in net earnings, a 34% increase over its estimated 1986 earnings.

Although MAI currently is trading at a cheap 11 times its estimated 1986 earnings and is “very inexpensive by most customary standards,” Orr does not recommend the stock, because Drexel was the lead underwriter in MAI’s initial offering and a recent debt offering.

Quiksilver Inc. said Friday that it has filed with the Securities and Exchange Commission for an initial public offering of 2 million shares of common stock.

The Newport Beach-based casual clothing maker said the sales price is expected to be $8 to $10 a share. Shares will be traded over the counter.

About half the offering will come from certain selling shareholders. Following the offering, company officers will continue to hold about 2 million shares of a total 4 million shares outstanding.

Wedbush, Noble, Cooke Inc. is the underwriter.

About $3 million of the proceeds will be used to acquire the Quiksilver trademark from an Australian firm that has been licensing its use to the company, said a Wedbush, Noble, Cooke spokesman. The one-time payment, he said, will eliminate royalty payments totaling more than $500,000 a year.

Quiksilver was formed in 1976 by Jeff Hakman, a world champion surfer, and Bob McKnight, a former Newport Beach lifeguard and current president of the company.