If investors had put their money in Orange County’s biggest stocks in the second quarter, they would have beat the major indexes with a bounce in beaten-down technology shares and the continued revival of healthcare stocks.
The Business Journal’s OC Billion Dollar Club, which includes local companies with a market value of $1 billion or more, was up by 45% for the quarter, according to Newport Beach-based Roth Capital Partners LLC. The OC 50 collection of smaller companies gained 29% for the period, while the OC Tech index was up 64%.
All three OC groups managed to beat the national indexes. The Dow Jones Industrial Average was up 7% in the second quarter, while the Nasdaq gained 17%. The S & P; 500 ended up nearly 5.8%.
“Every subsector and every major index was up in the second quarter,” said John Prichard, portfolio manager at Newport Beach-based Knightsbridge Asset Management LLC. “It was difficult not to make money this quarter.”
Of course, the second-quarter gains came after more than a year of declines among some OC stocks and the national indexes. And bad news stemming from second-quarter earnings results weighed heavily on shares last week.
But Prichard said he saw a subtle change in sentiment during the second quarter, fueled in part by interest rate cuts by the Federal Reserve Bank.
“For the first time in a year, growth-style investing is beating value,” he said. “The market is usually strong after six rate declines.”
Gains in a few stocks led to the increase in the OC Billion Dollar Club, which is weighted by market capitalization.
Irvine chipmaker Broadcom Corp., which recently regained its spot as OC’s most valuable company with a $10.7 billion market cap as of last week, saw its share price rise 59% in the second quarter. Other big gainers included: Irvine-based Exult Inc., which rose 87%; Intersil Corp., also based in Irvine, up 143%; and Aliso Viejo-based QLogic Corp., up 214%.
Irvine drugmaker Allergan Inc., which overtook Broadcom as OC’s most valuable company last year, saw its shares rise 19% in the second quarter. As of last week, Allergan counted a market value of $9.7 billion.
Seven out of 20 Billion Dollar Club stocks posted gains of more than 50%. Four companies rose by more than 100% in the period.
The Billion Dollar Club is prone to a “success bias” because it is periodically updated as stocks that fall below the $1 billion market value threshold are pushed out and stocks that rise above the mark are added to the index.
Three companies fell out of the Billion Dollar Club while one was added in the second quarter. Irvine-based Newport Corp., Anaheim’s Pacific Sunwear California Inc. and Santa Ana-based Powerwave Technologies Inc. fell from the index. Exult was added to the group.
The OC Tech index, which had the strongest performance in the quarter, saw 16 stocks gain, while four slipped slightly. Ten of the tech stocks rose by more than 50%, while six stocks had triple-digit gains. The tech index is made up of computer software, hardware, communications and chip companies, many of which also are in the Billion Dollar or OC 50 indexes. OC Tech excludes biomedical and biotech stocks.
“In April, the consensus expectations were at their lowest level in 12 months,” Prichard said. “The glass became half-empty instead of half-full. That’s what played a large part in the market bottoming out.”
The bullish trend was widespread as gainers outnumbered losers. In the OC 50, which had a more modest gain compared to the Billion Dollar Club and OC Tech, more than two stocks rose for every one that fell.
In the S & P; 500, “two-thirds of the stocks had positive returns and about three-fourths of the stocks in the mid-cap category rose,” Prichard said. n
