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Local Stocks' Flat Showing Ends 2 Years of Growth : Investment: The Valley-area index of 94 firms shows little change in the 2nd quarter. A late rally is called positive.

July 06, 1993|DON LEE | TIMES STAFF WRITER

Led by sharp declines in banking and entertainment issues, regional stocks overall turned in a lackluster performance in the second quarter, ending more than two years of solid growth.

The local area's stocks, which represent mainly smaller companies, had risen sharply since 1991 in tandem with the national market for small-company shares. But for the three months that ended June 30, local share prices failed to keep pace with the overall stock market, which for the most part saw a modest gain.

An index of stocks of 94 companies in the San Fernando, Santa Clarita and Conejo valleys and Ventura County showed virtually no change from March 31 to June 30, according to Media General Financial Services, a Richmond, Va., firm that compiles the index for The Times. (The index rose 2.9% in the first quarter, and 19.5% for all of 1992.)

Despite the lack of growth, one positive sign is that local stocks finished the second quarter with a rally. The Valley-area stock index actually declined 4% in April amid investors' worries about inflation, but the market rebounded in late May.

At the end of the second quarter, 48 of the local stocks posted declines, while 43 advanced. Three finished unchanged.

Many of the winners in the last quarter were cyclical stocks, which tend to benefit from a slow recovery, and technology issues. They included H&H Oil Tool Inc., a Santa Paula leaser of oil-drilling equipment, and two Calabasas-based companies that topped that list of winners: Xircom Inc., a producer of components that link personal computers, and Players International, a developer of riverboat casinos.

Yet as a whole, Valley-area stocks trailed several broader measures of the stock market.

The Dow Jones average of 30 industrial blue-chip stocks rose 2.4% in the latest quarter, buoyed by gains in heavy industrial stocks. The NASDAQ composite index, which includes about 4,000 stocks of mostly smaller companies, was up 2%. The Standard & Poor's composite index of 500 industrial stocks, however, was virtually unchanged in the quarter.

The weakness in local stocks reflected the plodding national economy, uncertainties surrounding the new Clinton Administration and continued problems in the real estate and banking industries.

Indeed, most of the major publicly traded banks and savings and loans in the region lost ground. The biggest loser was Glenfed Inc., the nation's fifth largest thrift. Although the parent of Glendale Federal Bank more than halved its loss in the three months that ended March 31, to $50.4 million before special items, Glenfed's stock nonetheless tumbled 39% in the second quarter, to $1.75 a share.

The huge cloud over Glenfed is the threat that Glendale Federal Bank will be seized by federal regulators. Glenfed has proposed a plan to boost the thrift's capital, which is about $400 million below government-mandated levels. But it remains unclear whether Glenfed will be able to meet the government's extended deadline of Aug. 31.

Federal regulators this spring also levied stiff new requirements for Ventura County National Bancorp, which has been hammered by real estate losses. In the second quarter, the Oxnard-based company saw its stock price drop by a third, to $2.50 a share. Also losing ground in the second quarter were Citadel Holding Corp., the Glendale-based parent of Fidelity Federal Bank, which dropped 20% to $17.50, and CU Bancorp in Encino, down 15% to $5.31 a share.

Real estate problems also hurt Mortgage & Realty Trust, a real estate investment trust with executive offices in Burbank and Pennsylvania. Its stock plunged 61% to less than $1 a share.

Some financial-services issues, however, prospered in the second quarter. Shares of Foothill Group Inc., which has executive offices in Agoura Hills and Los Angeles, climbed 21% to $10.88 a share after the firm announced in April that it had raised $432 million from institutional investors to loan to distressed companies. Similarly, JMC Group, formerly Spear Financial Services Inc. in Glendale, saw its stock rise 21% to $11.38 a share. Investors have applauded JMC's recent efforts to refocus its business on marketing annuities and insurance-related investments.

Nationwide, entertainment stocks generally performed well in the second quarter. But not in the Valley.

Shares of Live Entertainment Inc., a Van Nuys distributor and retailer of videocassettes, declined 16% to $1.88 a share. The company, which recently emerged from bankruptcy reorganization, reported in May that it lost $728,000 in the first quarter on a 15% drop in sales. Television producer Dick Clark Productions Inc. in Burbank has also been contending with lower sales, and its shares fell by 11% to $4 a share.

Meanwhile, Walt Disney Co.'s stock fell 8% to $40.75 a share in the latest quarter. Even though Disney posted a profit of $204.9 million in the three months that ended March 31, the Burbank-based company has had big losses at Euro Disney, its struggling theme park near Paris.

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