O.C. Stocks Had Wild Ride in 1996

The past year proved to be a rough-and-tumble affair for many Orange County stocks.

A handful of retail stocks, most notably Oakley Inc., acted more like their notoriously fickle high-tech cousins, rocketing to new highs and almost immediately tumbling to new lows.

Some of 1995’s hottest stocks--such as L.L. Knickerbocker, which rose by an astronomical 792%--chilled considerably during 1996 as investors apparently determined that there was more sizzle than substance.

Initial public offerings made to cash in on the bull stock market also drew mixed reactions. Some, such as Ingram Micro, started strong and remained healthy. But others--such as hard-hit Mossimo Inc.--were whip-sawed by nervous investors who pushed them into the stratosphere before kicking them into the basement.

The high-tech sector continued to exhibit a schizophrenic bent, generating many of the county’s highest-flying and lowest-diving stocks.

Even though the overall bull market continued to charge forward, investors were finicky, choosing stocks that seemed ready to rise, but dropping them at the first blush of trouble.

Accordingly, the 114-member Bloomberg index of Orange County stocks included a wide array of performances.

Pacific Sunwear of California’s stellar 329.2% rise led the Bloomberg index, with eight members enjoying share price increases of at least 100%. At the other end of the market spectrum, Quality Systems’ 75% drop led the list of 40 companies that saw their stock prices fall.

In 1996, the local stock index managed only an anemic 7.66% increase, a decidedly weak showing against the Dow Jones Industrial Average’s 26.1% increase and the 20.26% increase registered by the Standard & Poor’s 500.

In contrast, during 1995, the index kept pace with the Dow Jones Industrial Average and the Standard & Poor’s Index.

But, experts say, strip away high-fliers such as Qlogic Corp. (up 237.7%) and big losers such as STM Wireless (down 63.6%), and a brighter snapshot of the local stock list emerges.

“Orange County did well in 1996,” said Chapman University economist Esmael Adibi. “I’d bet that the county, absent those that did extremely well or that were devastated, matched the Dow Jones Average.”

The past year was a dream come true for Pacific Sunwear, which was coming off a nightmarish 1995 when its stock lost 41.9% of its value.

The 200-unit retail chain didn’t start the year on solid footing. Shareholders were stunned in January when President and Chief Executive Michael Rayden, who had crafted a corporate recovery plan, left for greener pastures.

But longtime Pacific Sunwear executive Greg Weaver more than adequately filled in, retail industry analysts said, and the company’s shares rose to a new high of $29.50 as the chain bolstered revenue through the addition of blue jeans, shoes and a boutique that offers apparel and accessories for younger women.

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Pacific Sunwear wasn’t the only retail success.

Wet Seal, which successfully accomplished the tough task of buying and assimilating the 237-unit Contempo Casuals chain, is now making a run at County Seat, a 740-unit chain in Dallas that is in bankruptcy. Analysts credit West Seal with assembling a shrewd blend of marketing savvy and operations expertise.

CKE Restaurants Inc. also performed well, registering a 125% gain for the year. The company finished strong, reaching a yearly high of $35.625 in late December.

The past year also produced disappointing results for some Orange County companies.

Quiksilver rose to a yearly high of $47.375 in May before tumbling to a yearly low of $18.625 in August. Retail analysts blamed softness in the company’s core, U.S. markets.

Founder and Chairman Jim Jannard saw Oakley Inc.’s stock hit a yearly high of $47.375 in May--but the stock fell to just $9.50 in late December, sparking a handful of civil lawsuits from disgruntled investors.

High-tech stocks again weighed in with a wide range of performances.

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Shareholders rewarded Western Digital for shedding marginal businesses that had bogged the company down. The Irvine-based company focused on its core computer disk drive business and its share price rose by 218.2%.

But investors savaged another computer data storage maker: Pinnacle Micro Inc.’s shares fell by 75% as the company struggled to control its costs. Irvine-based Pinnacle tried to regain momentum, lopping off 15% of its work force and reporting that founder and Chairman William F. Blum had resigned to make way for new management.

Quality Systems executives explained 1995’s stunning stock price jump of 792% by noting--tongue-in-cheek--that the stock that began the year at $2 had nowhere to go but up. During 1996, however, the stock had plenty of room to go in either direction--and it ended up tumbling by 75% to $6 in late November.

Comparator Systems Corp., a perennial penny stock, rocketed to as high as $1.88 per share before a major stock market scandal erupted, knocking the Newport Beach-based company’s stock back to a penny.

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While the local stock index gives investors additional insight into the local economy, experts agree that there’s no reason to panic given the Bloomberg index’s failure to keep pace with larger, national indexes.

“Increasingly, it’s difficult to find a correlation between the local economy and a stock list or chart,” Cal State Fullerton economist Anil Puri said. “Look at the national economy, which showed signs of slowing in the third quarter, and contrast that with the stock market, which continued to hit record highs.”

The tie between local stocks and the local economy is further blurred, Puri said, by the fact that so many of the county’s jobs are generated by small, privately held companies with dramatic potential to grow, as well as large, out-of-town companies that employ significant numbers of Orange County residents.

“Look at a company like Disney,” Puri said. “It’s responsible for thousands of jobs, its stock price is very good--but it won’t show up on a local list.”

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Orange County Index

The Bloomberg Orange County Index, a weighted index designed to measure the performance of major Orange County stocks, ranged from a high of 160.08 points in May to a low of 127.29 in July. Weekly closing levels for 1996:

Jan.

5: 131.86

12: 130.12

19: 129.87

26: 131.28

Feb.

2: 132.70

9: 135.40

16: 135.94

23: 137.70

March

1: 137.64

8: 136.61

15: 139.93

22: 141.04

29: 141.77

April

5: 143.02

12: 140.09

19: 143.48

26: 149.54

May

3: 150.76

10: 153.44

17: 160.08

24: 159.33

31: 159.10

June

7: 156.42

14: 155.17

21: 149.26

28: 148.83

July

5: 144.61

12: 136.29

19: 134.06

26: 132.20

Aug.

2: 138.63

9: 140.90

16: 141.63

23: 143.34

30: 143.82

Sept.

6: 144.47

13: 149.99

20: 149.56

27: 148.80

Oct.

4: 149.94

11: 147.15

18: 146.52

25: 145.02

Nov.

1: 141.75

8: 145.03

15: 143.20

22: 141.69

29: 144.06

Dec.

6: 144.36

13: 144.14

20: 143.54

27: 143.07

Source: Bloomberg Business News