Orange County’s diverse crop of publicly traded companies held up relatively well as worries about China’s economy whipsawed the stock market here and in other markets around the world.
Last week ended with the larger market climbing back from a plunge that lasted nearly a week, raising global concern over the interconnected financial markets and talk of a broad correction in the general U.S. market.
The drop did get close to correction territory—generally considered a trim of at least 10% to broad indexes—in a bearish turn from a rally that’s gone for six years and had sent the S&P 500 Index up about 98% since the depths of the Great Recession in mid-2009.
The combined effect on the 101 largest Orange County-based publicly traded companies—which range from $28 billion to about $1 million in market capitalization—roughly mirrored the global picture.
Business Journal research included a comparison of market caps on Aug. 3, the first trading day of the month, and Aug. 26, when the markets began to rebound. We found that the past month or so of economic and corporate activity cost the group of 101 OC companies about $8.4 billion in market cap, a collective decline of 6%—from $132.2 billion to $123.8 billion. The S&P 500 index fell about 8% over the same time period.
We then divided the 101 OC stocks into the following sectors: technology, real estate, healthcare, finance, services, retail and other, which includes manufacturing, energy and agricultural-products companies.
Research showed that events and reports other than U.S. and international headlines were part of what drove the share prices of local companies, as some fell more dramatically based on their own performances, and others seemed to get a haircut as a matter of the larger market’s drill.
The market cap totals of each sector saw the following drops:
• Tech—6%.
• Real estate—6%.
• Healthcare—6%.
• Finance—5%.
• Services—10%.
• Retail—29%.
• Other—9%.
Tech
The technology sector of OC’s public companies comprised 21 businesses with a total market cap of $55.8 billion as of Aug. 26. The sector market cap was down about 6% over the month, absorbing a smaller hit than the overall U.S. market.
The decline is more or less an average of the declines seen by chipmaker Broadcom Corp. and disk-drive maker Western Digital Corp., the biggest tech companies in OC and among the largest in their industries nationwide.
Broadcom’s market cap was hardly hit throughout the month, logging a dip of 2%.
Western Digital saw its market cap fall about 10%. Its stock had been falling steadily since July 30, when it jumped about 10% from the day before thanks to positive news on earnings. Comparing Western Digital’s Aug. 26 stock price with just prior to the July 30 jump showed the price had stayed about flat.
The company ended last week with an announcement of layoffs at its Irvine headquarters and other offices in California—its second round of job cuts this year (see related story, page 6).
Tech companies that saw share price increases included QLogic Corp., whose price moved up 10% over the analysis period. QLogic stock had already plummeted by more than 20% at the end of July when it reported disappointing June quarter results.
Real Estate
The real estate sector also saw its market cap fall by 6% to $27.5 billion. Real estate investment trust HCP Inc., the biggest of the group by far, fell about 4%.
Homebuilders Standard Pacific Corp., TRI Pointe Group Inc. and William Lyon Homes were largely in line with the S&P 500 Index, with William Lyon Homes slower to rebound late last week.
Aliso Viejo-based New Home Co. saw its market cap fall about 21% over the month after logging a drop earlier than other stocks and the general index, between the first and second week of August.
Healthcare
The healthcare sector market cap fell 6% to $22.3 billion.
Edwards Lifesciences Corp.—the biggest company in the category and which accounts for two-thirds of the sector’s total market cap—fell about 8%, while market cap increases by other companies helped offset the decrease. San Clemente-based ICU Medical Inc., for instance, saw its market cap rise 14% to $1.8 billion over the month, thanks in large part to strong second-quarter earnings that sent its stock up 18% on Aug. 11.
Finance
The market cap of OC’s publicly traded finance companies fell 5% to $7.4 billion.
Impac Mortgage Holdings Inc. saw its share price fall over several days, including a tumble after an earnings announcement, and hold steady for most of the middle of August. It moved counter to the market over the past week or so, particularly on Aug. 24, when major indexes fell and the Dow Jones Industrial Average had its worst day in four years by point declines, by closing up nearly 7%.
OC-based commercial banks painted a mixed picture; several generally moved with the market, logging declines of between 2% and 6% over the month, while Pacific Premier Bancorp stayed flat and some such as Banc of California Inc. saw modest stock price increases.
Services
The services category saw its market cap fall by about 10% to $7.3 billion.
Restaurants led the overall decline: El Pollo Loco Holdings Inc.’s stock dropped 37% over the month; BJ’s Restaurants Inc. fell 15%; Del Taco Restaurants Inc. fell 17%; and Habit Restaurants Inc. fell 20%.
Retail
Retail had the biggest percentage drop in market cap at 29%, to $754.1 million.
The dip looked to be tied to the sales outlook at home rather than the outlook in China.
Boot Barn Holdings Inc. fell 36% over the month, taking into account the 18% drop following its after-market announcement on Aug. 4 of its June quarter financial results, which included weaker-than-expected net income.
The month-long movement of Tilly’s Inc. stock—which fell about 17% between Aug. 3 and 26—appeared closely in line with the S&P 500, with a steeper drop about a week ago and a slower bounce back.
Pacific Sunwear of California Inc.’s market cap was up about 24% over the analysis period to about $53 million, slightly offsetting the category’s drop.
The 30% decline in the retail sector had little effect on Orange County’s overall market cap, as the sector accounts for less than 1% of the total market cap of the 101 publicly traded local companies.
Other
Other sectors—a combination of energy, manufacturing and agriculture-related stocks—saw a 9% drop in market cap over the month.
Much of the decline was due to energy stocks, which typically exhibit more volatility than other industries.
The market cap of Newport Beach-based Clean Energy Fuels Corp. fell 23% to $401.2 million; Quantum Fuel Systems fell 26% to $36.6 million; and BlueFire Renewables Inc. fell 48% to $1.3 million.
A handful of smaller companies saw their share prices increase.
Lake Forest-based Comarco Inc.’s market cap was up 12% to $2.8 million; Green Automotive Co. was up 33% to $2.7 million.
