Like racehorses leaping a tall stone wall on a steeplechase course, most of California's biggest stocks handily survived last October's stock market crash. The few that took hard falls in October of 1987, however, generally haven't recovered.
That pattern is apparent from a look at the market values of California's 100 biggest stocks, which as a group recovered gamely after Oct. 19 and, overall, posted admirable gains between January, 1987, and April, 1988. The group ended that 15-month period with an increase of $22 billion, or 12%, in their market value.
Indeed, these stocks were still 1% ahead of their January, 1987, market value at the close of the market's devastating slide of Black Monday.
Yet, while most stocks have recovered from last October's pasting, many of those not supported by solid earnings--including many medium-sized and smaller firms--are still struggling.
"One of the big contrasts is between companies that are making money, and those (that) just expect to," said Jim McCamant, editor of the Medical Stock Technology Stock Letter in Berkeley. "People aren't willing to buy stock on hope any more; that's what happens in a bear market."
The market has been merciless toward many young high-tech and drug companies, such as Cetus, that have prospects but no profits. The stock of many financial service firms, shunned by many investors even before October, have become even less popular since the fall.
Last year, leading California companies joined the hundreds of concerns that bought their own stock after--as well as before--the market slide. Among the big California concerns that bought their own shares were Atlantic Richfield, National Semiconductor, Litton, MCA and Fluor.
The stock of leading high-tech firms and big exporters has been bid up almost as if the market slide never occurred. The high-tech firms on The Times list have expanded their collective market value by 50%, or $13 billion, during the past 15 months, aided by demand for a new generation of computer hardware and software and the fillip given to export sales by the lower dollar. They're up 12% just since Oct. 19.
Hewlett-Packard, top ranked in market value with outstanding stock worth $16 billion, has added 49% to its market value since the beginning of 1987. Helped by increased export sales and the promise of a new computer line, the Palo Alto company's market value has gained 30% since the October market crash.
Intel Corp., the resurgent computer chip maker, was still up 87% for the year on the day after the crash, as investors concentrated on the Intel microprocessors that will be built into personal computers, computer terminals and other products.
The high-tech group includes several of the year's most dazzling success stories, such as Oracle Systems and Sun Microsystems. Oracle, a tiny Belmont, Calif., software concern, has increased its market worth 238%--to $930 million--since the beginning of 1987, while Sun, the workstation manufacturer, has increased its market worth 66%, to $1.2 billion.
Yet--unlike the days before the crash--investors are no longer indiscriminate buyers of high-tech issues. The market value of minicomputer maker Tandem Computers, which is struggling with earnings, has fallen 28% since October. And the market value of chip makers National Semiconductor and Advanced Micro Devices, which aren't cashing in on the latest generation of chip technology, are off 23%, and 3%, respectively.
The market value of California's oil companies has increased about 20% since the beginning of 1987, helped by expectations that oil prices have finally bottomed out, strong cash flow and whispers that there may be more takeovers in the oil patch.
The biggest gainer has been Atlantic Richfield, which virtually doubled its net income in 1987. Arco's market value has risen 40% since January, 1987.
The market worth of Chevron, on the other hand, has remained flat, as the company has struggled to reinvigorate its marketing and refining operations.
As a group, California's aerospace sector also lost market value for the year, largely because of the clouded earnings prospects of Northrop, now struggling with production problems, and Lockheed, which faces the end of its lucrative C-5B military transport plane contract and other worries.
"Aerospace has really lagged as a sector," said Thomas F. Caraisco, director of research at the Henry F. Swift & Co. brokerage in San Francisco.
The combined market value of the five big aerospace companies value has declined about 5%, to $10.5 billion, since the beginning of 1987.
One of the clearest beneficiaries of the export surge has been Tiger International, owner of Flying Tiger Inc., the world's largest scheduled air cargo line. Since January, 1987, as Asian demand for U.S. manufactured goods has filled the bellies of Flying Tiger planes, the Los Angeles company has added 42% to its market value. Tiger International's market worth has increased 59%--or $172 million--just since October.