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Big OC Stocks Soared in ’99

But Little Stocks? Egad. Chips, Dot-Coms Starred

Communications technology. Yeah, baby. That’s what drove the OC Billion Dollar Club last year. The index of 14 Orange County stocks with market caps of more than $1 billion virtually doubled in value in 1999, increasing by 97%.

Even by the standards of last year’s bull market, it was an impressive showing for the home team, easily beating the club’s peer group, the S & P; 500, along with the Dow Jones Industrial Average and even the much-celebrated (until last week) Nasdaq, which rose 86% in 1999.

“On a national basis, big tech led the way. The same thing happened in Orange County,” said Byron Roth, CEO and president of brokerage and investment banking firm Cruttenden Roth Inc. of Newport Beach, which compiles the index. “The gains are in the same areas as the Nasdaq’s gains, in the techsector. It was just a phenomenal year.”

Not so, though, for the smaller guys in OC. To the contrary: The OC 100, which tracks 100 companies with market caps of $25 million to $1 billion, rose a mere 3.3% for the year, barely nudging past the inflation rate. That was far below most other stock indexes, including the OC 100’s peer group, the Russell 2000, which was up 20%.

What happened to the OC 100? The culprit was big companies in bad slumps, in particular CKE Restaurants, First American Financial Corp., Fidelity National Financial and Western Digital Corp. Those companies’ declining fortunes pushed them out of the Billion-Dollar Club during the year as their market caps (share price multiplied by the number of shares outstanding) fell below $1 billion; as huge members of the weighted OC 100, their lowered stock prices caused a big drag on the group’s overall performance.

And, of course, the gyrations of the market so far in the new year have turned the 1999 showings into instant history. Through trading last Thursday, the Billion-Dollar Club was down 8.5% for the start of 2000, while the OC 100 was down 2.3%. In comparison, the DJIA was down 1.7% while Nasdaq was down 7.7%. (See Market Watch, page 16.)

The Billion Dollar Club’s increase is attributed mainly to five tech companies, all related to the hot communications sector in one way or another.

They are Paul Folino’s Emulex Corp., which makes fibre-channel products that enhance access to and storage of electronic data and applications, which was up a stunning 1,025%; Dwight Decker’s Conexant Systems Inc., the Rockwell International spinoff that supplies analog PC and fax modem chip sets, up 693%, Vince Smith’s Quest Software Inc., which makes software to enhance a company’s e-commerce system, up 629%; H.K. Desai’s QLogic Corp., which connects computer systems and their attached data storage peripherals, up, 389% ; and Henry Nicolas and Henry Samueli’s Broadcom Corp., a developer of circuits for broadband communications, up 351%.

(Since the OC Billion Dollar Club is a market-cap weighted index, the movement of the largest company by market cap, Irvine-based Broadcom, was responsible for the lion’s share of the index’s increase.)

Also gaining were Allergan Inc., a maker of eye-care products, which increased 54%, and Pimco Advisors Holdings LP, a bond investor, whose 21% rise reflects its pending purchase by Allianz AG of Germany.

“If you take the big tech out of the Orange County indexes, the rest had disappointing results,” said Roth.

“It was a narrow market and with a smaller index like this, giant winners take the whole group up. If you’re not in big tech names, you’re a very frustrated investor.”

Among the losers on the Billion Dollar Club were Bergen Brunswig Corp., beset by price pressures and acquisition problems, down, 76%; Ingram Micro Inc., hurt by laser-thin margins in the computer distribution industry, down 63%; and PacifiCare Health Systems., down 27% amid HMO blues.

But at least they stayed on the Billion Dollar Club. Six companies fell off the list this past year, including: Chuck Haggerty’s Western Digital, down 72% in the cutthroat hard-drive market; Bill Foley’s CKE, down 80% on problems with its acquisition of Hardee’s; and Foley’s Fidelity National, and Parker Kennedy’s First American Financial, down 53% and 61%, respectively, as part of a title-industry slump.

Also off the big list were Rockwell International, which moved its headquarters from Costa Mesa to Milwaukee, and two REITs, Health Care Property Investors Inc. and Nationwide Health Properties.

Five companies joined the Billion Dollar club in 1999: Rockwell’s progeny Conexant, Quest, Emulex, QLogic and e-commerce company Tickets.com. The latter was up 15% from its Nov. 4 IPO through the end of 1999. But recent slippage dropped it below the $1 billion mark in market cap, and this week it is off the Billion-Dollar Club.

A new member of the Billion-Dollar Club is Irvine-based Powerwave, which makes amplifiers for cellular phones. Last year it rose 213%.

As for the OC 100, it wasn’t just the bigger members of the index who performed weakly in 1999.

“The OC 100 can be compared to the bottom tier of the Russell 2000, which performed horribly,” Roth said.

Six companies registered declines of between 50% and 90%: Wet Seal, DayRunner, HomeBase, PharmaPrint, Prolong International and ARV Assisted Living.

But the OC 100 had some strong gainers, too. The best performance was the 1,491% increase by Santa Ana-based Starbase Corp. It develops software, such as the recently released StarTeam 4.0, that targets the corporate information technology structures.

Other top performers included: Yorba Linda-based Research Engineers Inc., a provider of software for engineers, up 997%; Garden Grove-based Bridge Technology Inc., which sells computer peripherals, up 972%; and Garden Grove-based Dense-Pac Microsystems Inc., a designer of products that store large amounts of memory into small spaces, up 786%. Anaheim-based MTI Technology Corp, which makes data storage systems, has seen its stock increase 719% and as of press time, and its market cap was slightly over $1 billion, compared to a $160 million market cap in March.

As late as mid-October, the Billion Dollar Club was up just 25%. Like the Nasdaq index (which most of the OC stocks in the two indexes are members of), the surge took place in the last 10 weeks of the year. n

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