When it comes to a recession, Orange County's best-performing companies show that conventional wisdom holds true: Health care firms do well.
After all, people still get sick and need medication and treatment, whether it strains their pocketbooks or not.
Of the 15 Orange County companies that made The Times 100--which is based on average return on equity over a two-year period--five were in health-related fields, including hospitals, insurers and drug manufacturers. Seven health-related firms dominated the list of Orange County companies ranked by stock market value.
For the Record
Los Angeles Times Tuesday May 12, 1992 Home Edition Business Part D Page 2 Column 6 Financial Desk 2 inches; 45 words Type of Material: Correction
Fidelity National Financial--Also in the Times 100, Fidelity National Financial was left off the list of Orange County stock leaders. Adjusted for a 4-for-3 split, shares in the Irvine-based title insurance concern rose 95% during the 12 months ended April 10. That showing would have placed Fidelity National third.
Topping the health firms was PacifiCare Health Systems, the Cypress-based health maintenance organization, ranked No. 11 on The Times 100. During the year, its earnings rose 45%, and revenue topped $1 billion for the first time.
"We knew 1991 would be a really tough, competitive year," company President Terry Hartshorn said. "We really stressed to doctors to control costs."
The company also gained on competitors by merging with Health Plan of America, a 130,000-member HMO in Orange.
Although the merger cost $50 million, "they're a cash-generating machine," said Mark Matheson, an analyst for Cruttenden & Co. in Newport Beach.
To a lesser extent, the same holds true for FHP International Corp., a Fountain Valley-based competitor in the HMO market. It fell from 27th to 45th in The Times 100. While the company's earnings rose, it also made $61 million in capital expenditures, including more than half a dozen new medical centers.
"We hope to see the return on the investment in the next year," company President and Chief Executive Wescott W. Price III said. "Hopefully we'll be back up there next year."
FHP, like PacifiCare, has also reined in health care costs. But unlike its competitors, FHP has its own medical staff, laboratory, hospitals and clinics.
Elsewhere in the health field, the hot commodity on the 1991 stock market--biotech firms--was no exception in Orange County. SPI Pharmaceuticals and its holding company, ICN Pharmaceuticals, both based in Costa Mesa, "made a lot of good acquisitions and their revenues have boomed," Matheson said.
SPI ranked 24th on the Times 100, up from 80th a year ago. The company, which makes vitamins, skin products and other drugs, added a partnership with a Yugoslavian drug maker to its existing ventures in Spain and the Netherlands. The company also was No. 2 among firms statewide in one-year average sales growth, with revenue jumping 159% to $364.4 million.
"We made dramatic gains in terms of every standard financial measurement--sales, operating income, net income, earnings per share and return on equity," said Milan Panic, chairman and chief executive officer of ICN.
ICN Pharmaceuticals, meanwhile, bounced back from a 1990 loss and was red hot. It ranked at the top of Orange County companies in stock price growth, going from just $5.50 per share a year ago to $14.00 early this month. The company also cracked Orange County's top 15 revenue performers with $460.4 million in sales, ranking 12th in the county.
Meanwhile, makers and inventors of medical devices--heavily concentrated in Orange County--also fared well. Santa Ana-based Tokos Medical Corp., which provides uterine monitors and nursing services to pregnant women at high risk of premature delivery, was eighth on the list of the county's top stock gainers, and Fullerton-based Beckman Instruments Inc., which makes and sells biological laboratory systems, was 15th.
"If there is a recession-proof industry, this is it," said David G. Anast, the publisher and editor of Biomedical Market Newsletter in Costa Mesa. "The bottom line is, hospitals have to replace old, broken equipment or (buy) equipment that cuts down on the cost to staff it. That's going to translate into major cost savings, and that's really where the growth is."
Outside of health care, the top Orange County companies are a diverse lot. Once again, surfwear-maker Quiksilver Inc. of Costa Mesa, food-products maker Bridgford Foods Corp. of Anaheim and fast-food giant Carl Karcher Enterprises of Anaheim made it to the list. Also on the list again are Irvine-based insurance firms UniCare Financial Corp. and Fidelity National Financial Inc.
Clothestime, the Anaheim off-price women's clothing retailer, didn't make the list in a year when consumers turned to low-cost apparel, but it ranked third among Orange County's top stock performers.
Only a few computer firms--bucking a personal-computer industry slump--made it to the list. On top was AST Research, the Irvine-based computer products manufacturer, which benefited somewhat as more customers bypassed IBM and Compaq for matching power at a lower price.
AST not only made it to The Times 100 after being off the list last year, but was the highest-ranked Orange County firm at No. 8. The company also made it to the recent Fortune 500 rankings.