YOU ARE HERE: LAT HomeCollections

The Last Shall Be First: Losers in '84 Climb to the Top

January 02, 1986|JOHN M. BRODER | Times Staff Writer

What a difference a year makes. The surging 1985 stock market lifted four firms--including three in the troubled oil industry--from last year's roster of the New York Stock Exchange's 20 worst performing stocks to this year's 20 best list.

But the rising tide didn't lift all boats. Oil stocks continued to dominate the losers lists on the major stock exchanges, joined by computer equipment manufacturers and firms in bulk commodities and shipping, badly hurt by foreign competition and the strong dollar.

Companies that spectacularly outperform or lag the market are, almost by definition, freaks. Firms recording consistent growth or steady declines rarely show up on such lists. But market players who bet on a Xerox or a General Motors seldom see their investments quadruple in 52 weeks, as did those who wagered on a dramatic turnaround at Texas International, the Oklahoma City oil firm that jumped from sixth on last year's NYSE losers list to the top spot among 1985's winners.

The winners and losers lists were compiled by The Times and Data Resources Inc., an economic analysis firm in Lexington, Mass. Percentage gains and losses reflect 1985 stock splits and dividends.

The top firms on both NYSE rosters this year all have lost substantial amounts of money in the past several years. But the winners were those seen to have turned the corner. The dogs were diagnosed by investors as sick and getting sicker.

Although the best and worst performers were what analysts call "outliers" because they sit far outside the averages for their industries, some broad market and economic generalizations can be drawn from the types of companies that appear on the lists.

Involved in Takeovers

Companies involved in takeovers are heavily represented on the winner's list, as are firms in financial services and equipment leasing. Over the past several years, the market has tended to reward with high stock prices firms that play the takeover game or trade in intangible financial assets. Companies that manufacture, distribute and sell goods are less glamorous and, for the most part, less highly valued by investors.

Thus, the winner's list contains Triangle Industries, Jewelcor, Pantry Pride and GAF, all successful suitors in mergers. Representing financial services firms are two California thrifts, Downey Savings & Loan Assn. and Financial Corp. of Santa Barbara, two computer leasing concerns, Comdisco and Continental Information Services, and the Baltimore brokerage house Legg Mason.

The losers list is a catalogue of business woes, from deadly foreign competition to falling energy prices. The slump in agriculture and natural resources dragged several firms down, as did the problems of the U.S. computer industry. More than half of the firms whose share prices plummeted are undergoing liquidation, Chapter 11 reorganization or extensive internal restructuring.

Management Assistance, based in New York, won the dubious honor of recording the biggest year-to-year fall in its share price, posting an 88% drop. Shareholders of the data-processing firm approved a plan of complete liquidation last January following two disastrous years, and investor interest has been nil.

Close behind was Amfesco Industries of Plainview, N.Y., which saw its stock value drop 87.6%. The manufacturer of low-priced shoes, boots and sandals was decimated by imported footwear, principally from the Far East. It filed for protection under Chapter 11 of the U.S. Bankruptcy Code in November.

In all, five computer-related firms and four energy concerns graced the roster of hard-luck stories. Joining them were companies in forest products, fertilizers, cement, shipping and shipbuilding--all depressed sectors in a generally healthy economy.

"The general theme is that the losers were manufacturing and resource companies and their vendors," said Lewis A. Sanders, director of research at the Wall Street investment house Sanford C. Bernstein & Co. "The winners were those in non-durable goods and service companies.

"The reason is plain to see. The slowdown in the recovery combined with the strength of the dollar in the first half of the year were terribly painful to the results of manufacturing and resource companies. The non-durable and service sector was insulated from those negatives. And investors reacted powerfully to those forces."

Texas International Rebounds

Examples of hot non-durable and service stocks from the winners list include the Gap, a fast-growing nationwide retailer based in San Bruno, Calif., selling moderately priced jeans and casual clothes; Jewelcor, a chain of catalogue stores; the two California thrifts, and a firm specializing in computer services to the U.S. government, El Segundo-based Computer Sciences.

All, however, were bested by Texas International, whose shares last year fell 78% in value. This year, despite losses estimated by company officials at $35 million, the stock price rose 411% to $5.75 from $1.125.

Los Angeles Times Articles