L.A. small cap stocks drift downward during winter; decline marks dramatic reversal from robust autumn – Small Business Quarterly
Los Angeles-based small public companies’ stocks took a beating this winter, according to the Los Angeles Business Journal Small Cap 100 Index.
The LABJ Small Cap 100, created by Santa Monica-based investment management firm Wilshire Associates Inc., tracks the stock performance of 100 Los Angeles-based companies whose market capitalizations range between $7 million and $70 million.
For the winter period of Nov. 30 to Feb. 28, the LABJ Small Cap 100 was outperformed by both the S&P 500 and the Wilshire Small Cap Index, a national index of small public company stocks created by Wilshire Associates.
The LABJ Small Cap 100 lost 2.92 percent of its value during the winter period, while the three broader indexes all increased in value. The California Small Cap Index gained only 0.88 percent. The S&P 500 gained only slightly more by growing 1.78 percent. The Wilshire Small Cap (national). Index, however, gained an impressive 7.49 percent.
The stock performance of LABJ Small Cap 100 companies roughly paralleled that of companies tracked by the California Small Cap Index. This index also charts the stock performance of companies with market capitalizations of between $7 million and $70 million, but the statewide index reflects the performance of 384 California-based stocks.
Small Cap stocks, in general, have performed well in recent months, according to Dave Borger, director of research at Wilshire Asset Management, a division of Wilshire Associates. “With small cap stocks doing well, one might guess that the stocks on this index would do well too,” he said. “But that did not happen.”
Industry sectors turning in the best performance for the winter period on the LABJ Small Cap 100 were chemicals, food and agriculture, and tires and rubber. Unfortunately, none of those strong-performing sectors is heavily represented in the LABJ Small Cap 100 portfolio.
One company classified by Wilshire Associates as a chemical stock made its way into the top 10 performers list. That company is Burbank-based Mercury Air Group. Mercury’s stock price increased from $3.875 per share at the beginning of the winter quarter to $5.375 per share by the period’s end.
The LABJ 100’s most-heavily weighted sector, media, turned in a poor performance this winter. During that three-month period, the local small-cap media stocks lost nearly 5 percent of their combined value. And that slide in media stock values likely had an impact on the performance of the overall LABJ 100 index because the media group represents 11.74 percent of the portfolio’s total market capitalization.
The dreary winter performance of local small-cap media stocks marks a dramatic reversal from the robust performance turned in by those same stocks last autumn. During that period, small Los Angeles-based media companies enjoyed a 30 percent increase in combined stock value.
Two media companies are among the ranks of the worst performing stocks in the portfolio. Beverly Hills-based Las Vegas Entertainment Network put in the worst showing of the media companies. Its stock lost 50 percent of its value during the winter period, as the per-share price dropped from $3.50 at the beginning of the period to $1.75 at the end. That marks the second quarter running that Las Vegas Entertainment Network, a television syndication company, has been on the 10 worst performers list. In the autumn period, which ran from Aug. 31 to Nov. 19, 1993, Las Vegas Entertainment Network’s stock lost 37.74 percent of its value.
The other media company on this winter’s worst performers list is Beverly Hills-based Ventura Entertainment Group. That film and television production company’s stock dropped from $1.375 per share at the period’s start to 87.5 cents per share at the end, marking a 36.36 percent drop.
Not all the media companies performed so poorly during the quarter. In fact, one made the list of top 10 performers. Live Entertainment Inc., a video distributor, saw its per-share stock price increase by 33.33 percent, from $2.25 at the period’s start to $3 at the end.
Two other sectors largely responsible for dragging down the LABJ Small Cap 100 were electronics and finance. The electronics sector, which represents 9.16 percent of the combined market capitalization of the LABJ 100 portfolio, lost 11.41 percent of its value over the winter quarter.
The finance sector, which represents 7.58 percent of the portfolio’s market capitalization, lost 10.54 percent of its value.
One financial services company, Hawthorne Financial Corp., which is the holding company for Hawthorne Savings & Loan Association, hit the 10 worst performing stocks list, as its stock dropped from $13.50 a share at the period’s start to $6.50 at its end.
Likewise, the pharmaceutical and medical sector dropped in value by 11.51 percent. That sector represents a sizable 4.34 percent of the total market capitalization of the LABJ Small Cap 100.
One company in that sector, South El Monte-based Lee Pharmaceuticals, a manufacturer of dental and cosmetic products, lost 38.1 percent of the value of its stock. The per-share price fell from $2.625 at the period’s start to $1.625 three months later.
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