Analyst Sees Good Prospects in Market’s Recent Bad Spell

The recent stock market turbulence has hit Orange County stocks even harder than the market as a whole, said Mark Stewart, president of Silicon Beach Securities/ocstocks.com, an Irvine investment firm that specializes in local companies. The reason, he said, is that Orange County has a higher proportion of small-capitalization stocks, which have been damaged even more than the stocks of large companies.

But, as an investment advisor, Stewart looks for those silver linings. “I really think it’s creating a lot of opportunity,” he said. “What happens is the whole market comes down, bringing Orange County stocks down with it. When the rebound occurs, people go back in and buy the big names. We don’t have a lot of big names in Orange County. So many small-caps are just sitting down there with buying opportunities.”

Stewart is particularly high right now on some local high-tech and retail stocks. He cites Wet Seal Inc., a Foothill Ranch retailer of young women’s casual clothes, and Pacific Sunwear of California, an Anaheim-based maker of casual apparel, as good examples of companies with solid long-term prospects that have seen their stocks plummet because of short-term concerns. Indeed, Wet Seal’s stock hit a 52-week low of $13.63 during Tuesday’s session after the company said its third-quarter earnings will fall below analysts’ expectations. The stock closed at $14.56.

On the whole, Stewart is optimistic about the stock market. The recent turmoil has created a great deal of skepticism among investors, and he sees that as a signal--based on historical patterns--that the worst may have already passed. While the troubled economies in Asia are still a concern, he believes the market has already taken its lumps on that score. Any further declines in values would probably constitute an overreaction, he said, and that would create even more buying opportunities.