Bullish on Biotech

As a group, biotechnology stocks fell along with broad market in mid 1990. However, biotechnology stock leader Amgen is trading at a level that is up 10% from its value at midsummer, just before the slump began. Compared with the other technology industry stock groups, the biotechs have held their value remarkably well. As the market begins to come back, biotech stocks will be among the first to recover. Some of the economic currents induced by the oil crisis actually affect the biotech group in a positive way. Inflationary forces weaken the dollar, and a weak dollar always gives the pharmaceuticals a lift. Biotech stocks are closely aligned with pharmaceutical stocks and share in their price swings. There is, however, a much stronger force driving biotechnology – products. Over the span of the past decade, only 7 distinct and highly significant products were brought to realization by the fledgling industry. Now, in 1990 and 1991, eight more major products are imminent. In just one year, as many new drugs and tests should come to market as the entire industry launched in the past decade.
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Gianturco, Michael

Full text: [Forbes] Sep 17, 1990

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Housewares Chain Cooking Despite Cooling Economy

“Damn the recession, full speed ahead,” might easily be the motto of Lechters, Inc., the chain of 339 stores that hawks almost every conceivable kitchen utensil and cooking accessory in malls across the country. Despite an economic environment that has left many a retailer dead in the water, the company is preparing to open hundreds of new stores, propelled by a tide of rising profits. Although the Harrison, N.J. –based company has existed for more than 60 years, it has only been publicly held since June of 1989. Yet in that time the store has earned the respect of Wall Street analysts for its management strength and savvy. (excerpt)
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McNatt, Robert

Full text: [Crain's New York Business] Sep 17, 1990

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AmBase’s Bold Strategy Failed; it Finds Liquidating as Tough

AmBase Corp. had long been one of the stock market’s most notorious underachievers when early this year E. Magnus Oppenheim began buying up shares in the financial services company. Mr. Oppenheim, an investment manager, was encouraged by AmBase’s plan to sell its troubled insurance businesses, retire its debt and pay a special dividend to its long-suffering stockholders. “They had strategic studies from outside consultants,” says Mr. Oppenheim, who bought the stock for around $7 a share. “You had to believe they were going to be able to do this.” (excerpt)
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Belsky, Gary

Full text: [Crain's New York Business] Sep 17, 1990

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Maybe This Bank Should Have Cried Wolf

Once seen as a model of the perfect regional bank, PNC Financial Corp. has had its stock drop to 23 5/8 as of September 5, 1990, down 51% from a year ago. The company lacks credibility in the financial community. Analysts are mistrustful, arguing that PNC management has glossed over negative news. PNC was a spectacularly successful regional in the 1980s, nearly quadrupling assets to $47.8 billion and becoming the US’ 14th-largest bank. Then, PNC’s profits began to deteriorate, primarily because of bad commercial real estate loans. For the first half of 1990, earnings fell 26% to $183 million. The credibility issue arose from PNC’s low forecasts of nonperforming loans and estimates of future earnings that turned out to be overly optimistic. A class action lawsuit filed by shareholders in federal district court charges that PNC inflated the stock price by not fully disclosing the extent of the loan portfolio’s weakness. PNC’s desire to acquire troubled First Fidelity Bancorp has also strained credibility.
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Schroeder, Michael

Full text: [Business Week] Sep 17, 1990

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Liz Claiborne Without Liz: Steady as She Goes

In August 1990, Liz Claiborne and Arthur Ortenberg announced that they were resigning from the board of apparel maker Liz Claiborne Inc. Although the Ortenbergs gave up their operating duties in May 1989, their resignation from the board, coupled with a gradual sell-off of their 6% equity stake for at least $108 million, will virtually sever the company’s ties with its founder. Jerome A. Chazen, an original partner of the Ortenbergs and chief executive officer since Claiborne gave up the position in 1989, will be in charge. The Ortenbergs are leaving the firm in a strong position. Although the stock price declined from 34 in mid-July 1990 to a recent 27, institutional investors are not concerned. Kurt Winters of IDS Financial Services Inc. estimates that earnings should reach a record $201 million in 1990, up 22%, on sales of $1.8 billion. The firm has almost no debt and $373 million in cash for stock buybacks, a dividend increase, and expansion. Chazen has been working to gradually diversify the company and, since the mid-1980s, has created 14 separate businesses at Claiborne.
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Zinn, Laura

Full text: [Business Week] Sep 17, 1990

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Welcome to Brazil? Fed Policies Are Debasing the Value of the Dollar

In the weeks following the Iraqi invasion of Kuwait, markets have experienced an unfamiliar phenomenon – a weak dollar, rising Treasury bond yields, and declining stock prices. Rising long rates reflect Wall Street’s certain knowledge that a torrent of new government paper must soon come to market. Recent inquiries about the Federal Reserve Board’s intervention in the market for US government securities is a case in point. Fed and Treasury officials are preparing to finance some or all of the Resolution Trust Corp.’s (RTC) funding needs directly on the books of the central bank. This massive corruption of the Fed’s balance sheet with low-quality collateral is thought justified under the rationale of being necessary to take pressure off the Treasury’s cost of funds. This type of handling of price deflation suggests that mistakes of the past are being repeated on a larger scale. It is, furthermore, a truly Third World solution.
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Full text: [Barron's National Business and Financial Weekly] Sep 17, 1990

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Not the End of the World – And Marc Perkins Has Some Stocks

In an interview, Marc Perkins, chairman of Perkins, Smith Inc., discussed the current recession and bear market. In the current environment, some of the smaller and medium-sized banks have prices at a level that makes them one-decision stocks. Among the banks Perkins likes are 2 New Jersey institutions, Bankers Corp. and Harmonia Bancorp. He believes that bear markets have 2 phases. In the first phase, economic problems begin to appear and investors sell as soon as a disappointing announcement is made. In the 2nd phase, called the fear phase, a selling panic occurs. Although Perkins does not consider this bear market and recession the end of the stock market, he is concerned by the fact that, with the Iraqi invasion of Kuwait, the dollar did not soar as it usually does in a flare-up. One of the consequences of this is that the US may lose its unilateral right to denominate its obligations in its own currency.
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Welling, Kathryn M.

Full text: [Barron's National Business and Financial Weekly] Sep 17, 1990

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Analysts Say PHH Stock Now Seriously Undervalued

PHH Corp. is fighting market perceptions that have caused its stock to fall by more than a third in the last month. Although the company, and the few stock analysts who cover it, maintain PHH is fundamentally sound and well-positioned to weather an economic downturn, a jittery market has penalized the company because of fears that real estate and automobile markets are headed for tough times. “The analysts who follow us understand. But the investment public, as they see the real estate problems, has to understand that doesn’t affect us,” said Eugene M. Truett, assistant treasurer for the company. (excerpt)
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Kleiner, Kurt

Full text: [Baltimore Business Journal] Sep 17, 1990

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Tokyo Stocks Fall 2.14% as Buying Interest Cools; London Shares Erase Early Losses and End Mixed

Tokyo stock prices retreated broadly in thin dealings Monday with many investors on the sidelines because of a fall in bond prices and continuing uncertainty about the Mideast situation, traders said. As bond prices fell through the morning session and failed to recover during the rest of the day, buying interest in the stock market dried up, Mr. [Yoshihiro] Ito said. He said investors fear stock prices may drop below the year’s previous closing low of 23737.63 posted Aug. 23. Hiroyuki Murai, general manager of stock trading at Nikko Securities, said stock prices were pressured down mainly because of a small amount of selling by special money accounts that will close their books Thursday for midyear accounting. Because it takes four trading days to process transactions, Monday was the last trading day for these accounts, the official said, predicting less volatile trading for the rest of the week.
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Full text: [Wall Street Journal] Sep 18, 1990

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Stocks End Mixed in Slow Trading; Oil-Price Rise Boosts Energy Issues

Stock prices closed mixed in sluggish trading, but ended the session on an upswing as another surge in the price of oil rekindled buying interest in the energy sector. The Dow Jones Industrial Average rose 3.22 to 2567.33, but gains in Exxon, Chevron and Texaco more than accounted for the advance; the performance of the three oil stocks lifted the average by nearly six points. Broader market indexes also posted modest gains. Standard & Poor’s 500-Stock Index went up 0.94 to 317.77, the New York Stock Exchange Composite Index rose 0.47 to 174.62 and the Dow Jones Equity Market Index added 0.79 to 294.40.
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Wilson, David

Full text: [Wall Street Journal] Sep 18, 1990

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Profits’ ‘Quality’ Erodes, Making Them Less Reliable

But those reported earnings numbers are becoming less and less trustworthy, analysts say. The “quality” of reported profits is falling, which means those earnings are really weaker than they look. Quality of earnings measures how much the profits companies publicly report diverge from their true operating earnings. Low quality means the bottom line is padded with paper gains — such as the profit-fattening effect of inflation on a company’s reported inventory values, or gains produced by “underdepreciation,” when a company doesn’t write off plant and equipment as fast as their real value is falling. Because a decline in quality means companies’ reported earnings are weaker and less sustainable than they appear, it indicates likely trouble for future earnings — whether or not a recession arrives. If history is any guide, those lower-quality earnings also will come home to roost in lower stock prices, analysts say.
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Donnelly, Barbara

Full text: [Wall Street Journal] Sep 18, 1990

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Barden in Pact to Be Acquired; Stock Price Soars

Barden Corp., said it signed a definitive agreement to be acquired for $131 million by FAG Bearings Corp., the U.S. subsidiary of FAG Kugelfischer Georg Schaefer KGaA, a West German manufacturer of bearings and industrial systems. News of the transaction, based on an offer of $66.50 a share, sent Barden shares soaring. They closed at $63, up $30.50, in national over-the-counter trading. Under the agreement, FAG Finance Corp., a unit of FAG Bearings, will begin a tender offer for Barden’s nearly two million shares no later than Friday. FAG Finance doesn’t own any Barden shares at present. Barden said it expects the offer to be completed next month, subject to U.S. regulatory review.
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Hwang, Suein L

Full text: [Wall Street Journal] Sep 18, 1990

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OCC to examine 2 Florida banks

“It’s a regularly scheduled examination, nothing extraordinary,” Barnett spokesman Robert Stickler said of the upcoming reviews. “There’s nothing going on internally that should precipitate any big jumps in the stock price, but people are jumping on every little thing and blowing them out of proportion.” Southeast spokesman George Owen said he was not aware of a new examination. “The OCC did a thorough examination the first time,” he said. “I’d be surprised if they were back in Florida.” Stock analysts who follow both companies said a second examination was likely at Southeast. Barnett and Southeast were among the first Southeastern regional banking companies to undergo the initial special real estate reviews “and it makes sense that they would be the first to have routine examinations,” said Gerry O’Meara, a bank-stock analyst with Robinson-Humphrey Inc. of Atlanta.
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JAMES GREIFF

Full text: [St. Petersburg Times] Sep 18, 1990

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Oracle Confirms Layoff of 400 / Software company ran into problems by pushing sales to the limit / NEWS ANALYSIS

To a lot of observers in Silicon Valley, the Redwood City-based database software company has been headed for a fall. For several years, Oracle ceaselessly pushed its employees in the pursuit of sales growth. Oracle wasn’t content to merely beat competitors; it sought to “”cut off their air,” in a phrase attributed to chief executive Lawrence Ellison. At the same time, Oracle and its competitors faced slower growth because minicomputers that use their programs weren’t selling well. Last January, Oracle canceled a proposed offering of $100 million in convertible debt. Earnings disappointments in the past two quarters hammered its stock price – it fell another 5/8 yesterday to 6 7/8 compared to a high of 28 last March. In August, Oracle was forced to restate its earnings for the second, third and fourth quarters of its latest fiscal year. One analyst said that a Securities and Exchange Commission representative contacted him about Oracle at around the same time. An SEC spokesman yesterday declined comment, and there was no other indication of a formal commission investigation.
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Don Clark, Chronicle Staff Writer

Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Sep 18, 1990

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OIL AND BUDGET WORRIES KEEP STOCK PRICES DOWN

In early trading, the market was jarred by rising oil prices and talk of declining real estate values. ”Oil companies here decided to raise their gasoline prices yesterday, which psychologically was a big negative factor,” a trader at a Japanese brokerage said.
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Christina Toh-Pantin

Full text: [Philadelphia Inquirer] Sep 18, 1990

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Tokyo Stocks Close Lower

In early trading, the market was jarred by rising oil prices and talk of declining real estate values. ”Oil companies here decided to raise their gasoline prices yesterday, which psychologically was a big negative factor,” a trader at a Japanese brokerage said.
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Reuters

Full text: [New York Times] Sep 18, 1990

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Dow Advances by 3.22 in Quiet Trading

”The new lows are declining in number,” he said, ”and that’s encouraging.” He added: ”We have a market with no direction. It’s trying to react to a very oversold condition and is being kicked around by confusing signals: the budget talks, the gulf crisis and economic news.” Nike, the athletic shoe maker, which soared 6 3/4 last week, fell 3, to 72, in heavy trading. At its annual meeting in Portland, Ore., Josie Esquivel, apparel analyst at Shearson Lehman Brothers, said she could not explain the drop. ”Everything they said was great,” she said. ”I advised my clients to buy.”
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COLE, ROBERT J.

Full text: [New York Times] Sep 18, 1990

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Aon Corp.’s $40 Proposal Stands

Aon Corp. said it had been advised that the board of directors of Corroon & Black has rejected a proposal made by Aon on Sept. 12 to acquire all of the outstanding common shares of Corroon for $40 per share in cash and indicated a desire to proceed with its proposed merger with Willis Faber. Patrick G. Ryan, chairman of Aon, said: “Mr. Miller and the rest of the Corroon board have chosen to stand between the Corroon public stockholders and a transaction which is clearly better for them and the company, its employees and its clients. Our proposal was superior when made and has become even more superior due to a fall in the Willis Faber stock price. (excerpt)
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Steel, Joan

Full text: [Business Wire] Sep 18, 1990

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New Holder Suit Filed Against Data General

A lawsuit has been filed by Barry Pinkowitz of New York alleging that the executives at Data General Corp, where he was a shareholder, drove up stock prices for six months prior to disappointing financial results that they knew were coming.
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Edelman, Lawrence

Full text: [Boston Globe] Sep 18, 1990

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New Holder Suit Filed Against Data General

Last May 31, Herbert J. Richman sold 100,000 shares of Data General Corp stock at $11.90 each. Eight weeks later, the Westborough computer company, where Richman serves as vice chairman, reported a big loss in its third quarter and backed off a previous forecast that it would break into the red in the fourth quarter. Its stock fell 1 up 7 7/8 on the day of the news and has since traded as low as 5. Late last Friday, Data General disclosed that it had been sued by a shareholder, who alleges that Richman and other company executives knew bad news was coming but did not tell shareholders. Instead, the suit, Filed by Barry Pinkowitz of New York, charges that the executives drove up its stock price for six months prior to the disappointing financial results by telling investors that the long-troubled minicomputer maker was poised for a recovery. (excerpt)
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Edelman, Lawrence

Full text: [Boston Globe] Sep 18, 1990

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