Despite Early Surge, Local Stocks Lag at the End of 1986

Prices of San Fernando Valley-area stocks started fast in 1986, when the bull market was surging, but lost most of their gains late in the year when the overall market fell.

Of the 61 major publicly held Valley-area issues, 30 increased in price during 1986, 30 fell, and one was unchanged.

The mixed results for 1986 were in sharp contrast with the impressive performances registered by local issues early in the year, when the market was regularly setting records. At the end of the first quarter, gainers outnumbered losers by a 4-1 ratio. During that same period, the Dow Jones Industrial Average, the most widely followed market indicator, surged 18%.

But local stocks as a whole lagged behind the rest of the market for the full 12 months of 1986. An index of Valley-area stocks compiled for The Times by MPACT Securities of Austin, Tex., rose only 4.5% for the year, to 104.53. The index weighs all local stocks equally, showing how investors would fare if they invested equal amounts of money in each of the local stocks.

Year’s Dow Up

The Dow was up 22.6% during the year, to 1895.95, whereas the NASDAQ composite index of stocks traded over the counter, the market for most Valley-area stocks, rose 7.4%, to 348.83.

A prime reason for the lagging stock performance by local companies--those with headquarters from Camarillo to Burbank--was the computer industry’s continuing slump. The area’s three largest computer-related companies--Tandon in Chatsworth, Micom Systems in Simi Valley and Woodland Hills-based Dataproducts--all made the list of the top-10 losers among local stocks that trade above $2 a share.

Micom, a data-communications company, fell 38.6% to $13.50, and Dataproducts, a computer-printer maker, fell 29.8% to $11.50. Tandon fell 52.7%, to $2.31, as the computer company struggled in its shift away from manufacturing disk-drive storage devices and launched its own brand of personal computers.

The only major exception among computer-products companies was Micropolis, whose stock surged 114.3%, to $18.75 a share. The Chatsworth disk-drive maker benefited from strong demand for its high-capacity, high-speed disk drives and posted a $13.1-million profit for the nine months ended Sept. 26, contrasted with $527,000 a year earlier.

Olson Industries was the area’s biggest winner, rising 187.8%, to $29.50 a share. The Sherman Oaks company divested much of its egg operations in late 1985 to concentrate on its more profitable plastics-packaging business.

Other Winners

Other major winners included Cherokee Group, a fast-growing North Hollywood shoe and clothing company. Cherokee, which has predicted that the company will exceed its goal of increasing sales and earnings by 20% for the year ended Nov. 30, rose 142.1%, to $23 a share. Another strong stock performer was Martin Lawrence, a rapidly expanding chain of suburban art galleries based in Van Nuys, which jumped 132.7%, to $3.63 a share.

Burbank-based Walt Disney Productions was the biggest winner among the area’s largest companies. The entertainment company, which has benefited from strong performances by its theme parks, finished the year at $43.13 a share, up 52.8%.

Universal City-based MCA dropped 24.75%, to $38.38 a share. Its theatrical revenue suffered in 1986, in part because its “Howard the Duck” was one of the year’s biggest box-office bombs.

Lockheed, the Calabasas aerospace giant whose earnings were depressed after the $1.18-billion acquisition this year of Nashua, N.H.-based Sanders Associates, rose 2.0% to $50.13 a share.

Of the area’s stocks that closed at more than $2 a share by year-end, SFE Technologies’ was the poorest performer. SFE’s stock fell 54.3%, to $3.31. The San Fernando electronics concern on Monday reported a $15.9 million loss for the year ended Oct. 31, contrasted with a $5.0 million loss a year earlier, with sales falling 25.2% to $42.7 million.

Public Offerings Suffer

Two area companies offered public stock for the first time in 1986, and both fell in price. Tekelec, a Calabasas-based telecommunications company, went public in May. The company, which posted flat earnings in its last quarter, saw its stock fall 54%, to $5.63 a share, from its initial offering price of $12.25 a share. In July, Republic American, a workers’ compensation insurance holding company, was partly spun off by financier Carl H. Lindner. The company’s stock opened at $17.38 but ended the year at $15.25, off 12.2%.

Insurance stocks in general cooled off in price as some analysts began downgrading their opinions of the group late in the year, even though earnings for the companies have been strong.

Zenith National Insurance, an Encino workers’ compensation firm, was up 6.7%, to $21.88 a share. 20th Century Industries, a Woodland Hills insurer, increased 4.5% to $17.25, taking into account a 2-for-1 stock split in March. Burbank-based Fairmont Financial, another workers’ compensation company, was the top performer with a 33% increase in its stock price to $16 a share.

Joseph Grochmal, an insurance analyst with Conning & Co in Hartford, Conn., said many insurance stocks are notoriously cyclical performers and many investors sold their holdings last year after a big run-up in insurance stocks. “If you look at the last couple of years, this was a fantastic group. Now it’s taking a breather,” he said.

Three of the area’s publicly held companies disclosed plans in 1986 to be acquired. American Nucleonics, a Westlake Village maker of defense electronics devices being bought by Cleveland-based Eaton Corp. for $3.03 a share, closed at $2.94, up 96% for the year. Marantz, a Chatsworth stereo maker being acquired by Chicago-based Dynascan for $6 a share, rose 64.29% in the year, to $5.75 a share.

Powertech, a Chatsworth-based maker of power supply units that is being acquired by the Scotland-based Low & Bonar for $15.90 a share, closed the year unchanged at $15.50 a share.

TOP 10 VALLEY AREA STOCK WINNERS FOR 1986

Closing Price on Percent Stock Dec. 31, 1986 Change Line of Business Olson Industries $29.50 187.8 Plastics, food Cherokee Group 23.00 142.1 Apparel Martin Lawrence 3.63 132.7 Art galleries Micropolis 18.75 114.3 Disk drives American Nucleonics 2.94 96.0 Electronics Amgen 22.13 65.4 Biotecnology Marantz 5.75 64.3 Stereos Judy’s 4.25 54.6 Apparel Walt Disney 43.13 52.8 Entertainment Digitext 8.75 40.0 Transcription systems

Note: Excludes stocks whose 1986 closing price was below $2.

TOP 10 VALLEY AREA STOCK LOSERS FOR 1986

Closing Price on Percent Stock Dec. 31, 1986 Change Line of Business SFE Technologies $3.31 -54.3 Electronics Tekelec 5.63 -54.0 Telecommunications Tandon 2.31 -52.7 Computer equipment American Ecology 14.00 -48.6 Waste disposal HCC Industries 4.38 -46.1 Electronics Micom Systems 13.50 -38.6 Data communications Compact Video 4.38 -38.6 Video Terminal Data 2.00 -38.5 Imaging equipment Perceptronics 6.63 -31.2 Military research Dataproducts 11.50 -29.8 Computer printers

Note: Excludes stocks whose 1986 closing price was below $2.