Stock Ups & Downs : Economy, Mideast Fears and Local Companies’ Own Woes Leave 71% of Area Stocks With 1990 Loss

A disappointing year on Wall Street ended in shambles for stocks of more than two-thirds of the publicly owned companies in the San Fernando Valley and Ventura County areas.

While the Dow Jones Industrial Average fell 4.3% during 1990, stocks of 66 local companies tumbled an average of 12.3%, according to a survey compiled for the Los Angeles Times by Media General Financial Services of Richmond, Va. Forty-seven local stocks--or 71%--fell in price for the year, with 36 down more than 20%. Only 18 gained ground, with one unchanged. (The survey excluded those stocks whose Jan. 1, 1990, price was less than $1.50 per share, or which made initial public stock offerings after the first of the year.)

Only 12% of the companies surveyed reported better than 30% gains last year, contrasted with about one-fourth of the companies in 1989.

The unusually poor performance reflected the overall problems in stocks that traded last year on the over-the-counter market, which lists many small and new companies, including most local concerns. The NASDAQ composite index--the OTC market’s principal gauge--closed the year down 17.8%.

The year-end figures were decidedly worse than in July, when the Dow Jones average closed at a record 2999.75. That was just before Iraq invaded Kuwait, an event that triggered higher oil prices, nudged the economy into a recession and sent most stocks down.

Many of the local companies with poor stock showings had their own financial performance to blame as well as external factors. Problems included ill-fated ventures into new product lines, lawsuits by federal regulators, loan defaults and other credit problems.

But there were some notable exceptions.

While Mideast tensions put the brakes on most of the economy, they apparently helped fuel interest in Benton Oil & Gas Co., a small oil and gas exploration company in Ventura that saw its stock price balloon 233%, from $4.88 a share at the start of 1990 to $16.25 on Dec. 31. That made Benton the top-performing local stock last year.

Benton, which went public in March, 1989, is one of several small domestic oil companies that have attracted investors’ attention after oil prices shot up as high as $40 a barrel in post-invasion trading. Oil is now trading at around $27 a barrel.

Also, the company recently increased its stake in an offshore energy field in Louisiana to 26.7%, giving it rights to an estimated 3.1 million barrels of oil and 1.4 billion cubic feet of natural gas. Overall, Benton’s oil reserves increased from 23,000 barrels to almost 10 million barrels in 1990, and its natural gas reserves jumped from about 500 million cubic feet to 13 billion cubic feet.

As a result, Benton posted earnings of $503,068 for the third quarter that ended Sept. 30, contrasted with a loss of $104,551 a year earlier. During the same period, revenues increased nearly tenfold, from $176,000 to $1.41 million.

Another big local winner was Amgen Inc., a Thousand Oaks biotechnology company that produces an anti-anemia drug for patients with kidney disease. The company’s stock ranked second in The Times’ survey, showing a 154% jump last year to a 1990 closing price of $62.25 a share.

Amgen has a monopoly on a $300-million-a-year business in the United States, and profits from sales of its drug, called erythropoietin, or EPO, are running at the rate of nearly $50 million annually. But the company is awaiting a federal appeals court decision that might force it to share its EPO business with another manufacturer, Genetics Institute in Cambridge, Mass., which holds a rival EPO patent.

At the opposite end of the spectrum was Traditional Industries, whose stock had the worst performance in the survey. Traditional’s stock collapsed in 1990 and closed out the year at a mere 13 cents a share, down 95% from its 1990 opening price of $2.75 per share.

It was the second year in a row that Traditional’s stock ranked among the area’s top 10 losers.

The ailing Agoura Hills company sells packages of photo supplies and equipment--which typically cost $300 to $1,500--directly to customers and often provides them with credit to make the purchase.

The company’s troubles stem from a continuing dispute with the Federal Trade Commission over sales practices.

In 1989, Traditional attempted to settle the dispute by, among other things, agreeing to let many customers cancel their contracts with the company and by setting up a $250,000 trust fund to pay refunds to certain customers. Any money left in the fund was to be paid to the FTC.

But in October, the FTC alleged that Traditional had violated the settlement by continuing to misrepresent the quality and value of its products. The company has also been plagued by heavy interest payments and lawsuits by creditors. As a result, Traditional lost $5.5 million on revenues of $40.8 million in the nine months that ended March 31.

1990 was also a dismal year for Everest & Jennings International Ltd., a wheelchair maker based in Camarillo. The company’s stock dropped 88%, from $8 per share at the start of 1990 to $1 a share on Dec. 31.

Everest & Jennings has been struggling to recover from a disastrous attempt to diversify into other medical products during the 1980s. For the nine months that ended Sept. 30, the company lost $46.5 million on revenues of $156.3 million, compared with a loss of $9.5 million on revenues of $138.0 million for the nine months that ended Sept. 30, 1989.

In the quarter that ended Sept. 30, Everest & Jennings’ losses included a charge of $32.4 million for restructuring and writedowns of some assets. But the company said it has reduced overhead and operations costs, and has reached an agreement with its primary domestic lender to extend its present financing agreement through the middle of next year.

Another troubled company is Valley Federal Savings & Loan in Van Nuys, which suffered $138 million in losses in 1989, mainly because of problems at its mobile-home loan-making subsidiary. In May, the company got approval from federal thrift regulators for a plan to bolster its slim capital reserves, an action that saved it from the immediate threat of being placed in receivership.

But the thrift is still about $65 million short of the federal tangible capital requirement for an institution its size. Tangible capital is essentially equal to the net worth of the institution minus the value of some non-cash assets.

Not surprisingly, Valley Federal’s stock fell 72% last year, from $3.13 a share to 88 cents a share.

Martin Lawrence Limited Editions Inc., a Van Nuys operator of retail art galleries, had a bad year because of sluggish conditions in the art market, including disappointing sales at the major art auction houses Sotheby’s and Christie’s. For 1990, Martin Lawrence’s stock fell 67% to $2.88 a share.

Meanwhile, Micropolis Corp., a Chatsworth-based maker of computer data storage products, staged a comeback in 1990. Its stock, which had dropped 53% in 1989, rebounded 150% in 1990, jumping from $3.50 a share to $8.75.

The company was helped by improved demand for its disk drives and by cost-cutting measures begun in late 1989. Sales surged 50% in the quarter that ended Sept. 28, and the company posted a profit of $2.88 million, contrasted with a loss of $23.7 million a year earlier.

There was also a turnaround at Tekelec, a Calabasas maker of testing equipment for the telecommunications industry, thanks to increased demand and an expanded product line. Tekelec’s stock, which closed at $13.75 per share Dec. 31, was up 62% from $8.50 a year earlier. In the first nine months of 1990, the company’s profits rose 44%, to $3.65 million from $2.54 million a year earlier.

MCA Inc. was not among 1990’s top 10 local performers, but it created the most headlines when Japan’s Matsushita Electric Industrial Co. agreed to buy it for $6.59 billion. The stock of the Universal City-based entertainment conglomerate closed the year at $69.25 a share, up 11.2% from a year ago.

Despite the stock market’s poor showing overall, several emerging local companies went public for the first time in 1990. Among them was Pinkerton’s Inc., the venerable security firm founded in 1850 by the legendary private detective, Allan Pinkerton. The company, now based in Van Nuys, offered stock at $15 a share when it first sold shares to the public on April 4. Pinkerton’s stock closed the year at $22.50 a share, a 50% increase.

Pinkerton’s, which employs more than 39,000 security guards, is the nation’s biggest security firm. Its profits for the quarter that ended Sept. 7 soared 61% from a year earlier, despite a 4% decline in revenue.

Top 10 Regional Stock Winners for 1990

Closing Price on Percent Stock 12/31/90 Change Line of Business Benton Oil & Gas $16.25 +233 Energy Amgen 62.25 +154 Biotechnology Micropolis 8.75 +150 Computer Disk Drives Summit Health 3.00 +100 Health Care House of Fabrics 30.38 +75 Retail Fabrics Tekelec 13.75 +62 Telecommunications Spear Financial 3.00 +50 Securities/Insurance Ventura Entertainment 7.75 +38 Entertainment Syncor Intl. 10.00 +27 Pharmaceuticals 20th Century Industries 28.50 +24 Insurance

Note: Excludes stocks whose Jan.1, 1990 price was below $1.50. Source: Media General Financial Services, Richmond, Va. Top 10 Regional Stock Losers for 1990

Closing Price on Percent Stock 12/31/90 Change Line of Business Traditional Industries $0.13 -95 Photography Everest & Jennings Int’l. 1.00 -88 Wheelchairs New Image Industries 1.88 -85 Computer Imaging Mortgage & Realty Trust 2.38 -83 Real Estate Huntway Partners L.P. 2.50 -78 Oil Products Valley Federal S&L; 0.88 -72 Banking Pollution Research 0.47 -69 Pollution Monitoring Martin Lawrence 2.88 -67 Art Galleries Nu-Med Inc. 2.06 -64 Health Care ATI Medical 3.13 -63 Medical Equipment

Note: Excludes stocks whose Jan.1, 1990 price was below $1.50. Source: Media General Financial Services, Richmond, Va.