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Tech-Heavy O.C. Stock Index Plunges

Market: Joining broader slide, 29 issues were up, 77 down. NetGuru and PacifiCare took serious beatings.

October 13, 2000|E. SCOTT RECKARD | TIMES STAFF WRITER

Orange County stocks moved sharply lower Thursday, caught up in the overall stock market slide.

Of the 125 stocks in the Bloomberg Orange County Index, only 29 were up on the day, while 77 declined and 19 finished unchanged.

The index, heavily weighted with technology stocks, fell 7.49 points to 338.84, down 2.2% for the day. The index is now 26% below its March 10 peak of 460.79, which was achieved before a huge sell-off sent the technology sector tumbling.

Local stocks had been gradually recovering, flirting with the 400-level last month. But they have hit the skids again the last three weeks.

"What a day. And what a terrible month," said Ray Tang, a Laguna Beach money manager whose technology-laden portfolio has suffered in the recent downturn.

Tang said the only Orange County stock he would currently consider buying is Varco International Inc. of Orange, a provider of oil field equipment.

The market hasn't yet fully factored in the effects of higher oil prices, Tang said. Varco shares moved up 31 cents to $19.31.

Several Orange County tech stocks were pounded Thursday, including NetGuru Inc., which lost 33.3% of its value, the biggest percentage decline among local companies.

Santa Ana managed-care giant PacifiCare Health Systems took a beating for the second straight day after warning of possible quarterly losses. The stock, which tumbled 52% Wednesday, was down more than 30% Thursday.

Costa Mesa software developer FileNet Corp. bucked the trend, moving up 21% after posting solid quarterly financial gains.

Indeed, the local stocks generally weathered the battering better than the general markets. While the Orange County stock index dropped 2.2%, the blue-chip Dow Jones Industrial average lost 3.7%, the Standard & Poor's 500 index slid 2.6% and the Nasdaq composite index was off 3%.

Analysts cited several factors for the slump, including heightened tensions in the Middle East and a warning from giant retailer Home Depot that earnings won't meet third-quarter expectations.

Driven by worries over the decline, investors and analysts have deluged executives at NetGuru with calls, concerned that the Yorba Linda software company's big loss signaled internal trouble.

"There's no reason for it from an operating perspective," Chief Financial Officer Wayne Blair said.

The market has crushed NetGuru's stock since the spring, sending it from $58 a share in March to as low as $5 a share. It closed at $5.25 on Thursday, down $2.63.

The company specializes in providing services to clients in India, Blair said, and its competitors have suffered similar reversals.

"Until the last three or four days, they were down further than us," he said.

Hycor Biomedical Inc. closed at $5.47, down $1.03, or 16%, in Nasdaq trading.

Reg Jones, chief financial officer of the Garden Grove manufacturer of diagnostic tests, said the stock might have fallen because of "margin selling"--investors dumping Hycor shares to cover loans on other securities that suddenly came due when the market dropped.

Hycor, like other small companies, is a victim of a bear market unleashed by events in the Middle East, Jones said. The sell-off notwithstanding, company executives continue to have faith in Hycor. None sold any stock Thursday, Jones said.

"I don't think what's going on has anything to do with the company," he said. "We've done fairly well since the beginning of the year."

Despite the one-day decline, the company's stock has more than tripled this year.

The latest sell-off of local stocks could signal the end of the downturn that began with the huge drop in prices in March, said Mark Stewart, president of Stewart Securities, a Newport Beach money manager.

But he's not counting on shares of Orange County companies, many of which are small, to bounce back completely.

With virtually the entire market in a slump, investors are likely to rush to buy stocks of larger, well-known companies whose shares have taken a beating, Stewart said.

"When the market gets hit like this, people upgrade their portfolios to the bigger stocks, the Intels," he said. "They see a chance to upgrade, and sell their small- and mid-cap names.

Many Orange County stocks soared "to lofty levels last spring that they'll never see again," Stewart said.

"There's obviously some good quality in Orange County," he noted. "But when investors are getting shaken out over Home Depot and these other big stocks, they're certainly going to dump these little stocks they picked up on a tip in March."

Times staff writers Robin Fields and Marc Ballon contributed to this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Rough Sledding

The Bloomberg Orange County Index, which tracks 125 local stocks, has been retreating in recent weeks. Daily closes:

Sept. 1: 298.59

Thursday: 338.84

Source: Bloomberg News

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