OC Turnarounds Got Their Due in 2001
By RAJIV VYAS
In a miserable year for many Orange County stocks, turnarounds stole the show in 2001.
Shares of two companies that got back on their feet last year,Lake Forest-based Western Digital Corp. and Anaheim’s CKE Restuarants Inc.,posted eye-catching gains.
Those companies joined a handful of medical businesses and a few technology names on the plus side in what was an otherwise down year for OC stocks.
CKE Restaurants, owner of the Carl’s Jr. and Hardee’s fast food chains, was among the best performing stocks last year with a 250% gain. In the past year or so, the company cut debt, sold off restaurants to franchisees and closed some unprofitable stores.
The ailing Hardee’s chain, which CKE bought four years ago, even showed a small same-store sales increase late in the year.
Now CKE says it has profitability in sight this year.
“I think the worst is over, however,” said Russ Murdock, portfolio manager at Eclectic Associates, a Fullerton-based money management firm. “Cost-cutting measures have finally resulted in improvement in margins, profitability and most importantly, cash flow. At this rate of improvement, I would expect them to return to profitability in early 2002.”
Disk drive maker Western Digital, which expects to cap a two-year turnaround with a profit for the December quarter, saw its shares rise some 170% last year.
The gain was enough to earn Western Digital its place back in the Business Journal’s Billion-Dollar Club index (see page 12). Last week, the company counted a market value of more than $1.1 billion.
The biggest gainer of all OC stocks last year was Irvine-based Diedrich Coffee Inc., which saw its shares finish up 875%. The company’s stock went from 40 cents in January to end the year at 3.90.
Like Western Digital and CKE, Diedrich is working on a turnaround, though the coffee house operator isn’t out of the woods yet.
The year wasn’t as good for OC stocks as a whole. The Billion-Dollar Club, an index of 20 companies with a market value of $1 billion or more, declined by 27% last year. The Business Journal’s OC Tech index was off by 18%. The OC 50, which includes Western Digital and CKE, finished up 3%.
OC’s tech companies were among the hardest hit: Irvine-based Newport Corp., off 72%; Santa Ana-based Powerwave Technologies Inc., off 65%; and Irvine-based Broadcom Corp., off 46%.
“Stocks and sectors that were hit the hardest are those that had the loftiest growth expectations,” said Robert Venable, chief investment officer at First American Capital Management Inc., part of Santa Ana-based First American Corp.
And while there was a bloodbath in technology,three stocks in the OC Tech index declined for every two that rose,there were a few companies that bucked the trend.
Newport Beach chipmaker Conexant System Inc. rose 12% on strength late in the year in its wireless chip unit. The company plans to spin off the unit and pair it with Woburn, Mass.-based Alpha Industries Inc. The new company is set to have headquarters in OC and Massachusetts with $600 million in yearly sales.
Other tech gainers included: Santa Ana-based MSC Software Corp., up 100%; Santa Ana-based Ingram Micro Inc., up 60%; Irvine-based Intersil Corp., up 52%; Irvine-based Exult Inc., up 40%; and Microsemi Corp., up 11%.
Some healthcare and medical device makers also did well.
San Clemente-based Biolase Technology Inc., a maker of medical laser products, posted a 225% gain for the year. The company reported heady sales growth in 2001 and said it’s on track to report a profit for the December quarter.
Irvine heart valve maker Edwards Lifesciences Corp. also had a good year with a 59% surge in its share price on stepped up profitability.
Other gainers included Costa Mesa-based ICN Pharmaceuticals Inc., up 16%, and Fullerton-based Beckman Coulter Inc., up 6%.
Other healthcare companies didn’t fare as well. After a heady 2000, Irvine drug maker Allergan Inc. was off by 20% last year. Costa Mesa-based Apria Healthcare Group Inc. ended down 8%.
“Healthcare had an excellent 2000, which put some downward pressure on last year,” Venable said.
