2 Largest Firms Put Dent in Top 200 Total Value

By CONOR DOUGHERTY

Staff Reporter

The market value of L.A.’s 200 largest public companies took a 12.4 percent hit for the 12 months ended June 17 from the like period a year earlier, but much of the carnage centered on the area’s two biggest corporations.

In another sign of how local businesses have weathered the stock market troubles relatively well, 104 of the 200 companies surveyed saw their market capitalizations (per-share price multiplied by number of shares outstanding) increase over the like 12-month period a year ago, while 93 went down, one was unchanged and two companies are new to this year’s list.

The overall 12.4 percent decline, to $287.4 billion, is skewed by the poor performance of Thousand Oaks-based Amgen Inc. and Burbank-based Walt Disney Co., according to data prepared for the Business Journal by Duff & Phelps LLC. Take Disney and Amgen out and the market value of L.A.’s 198 largest companies actually grew 0.01 percent.

Last year, Amgen’s market cap was $69.7 billion, making it by far the largest public company in the Los Angeles area $9 billion more valuable than Disney at the time. Last week, the two were neck and neck in market value. These two behemoths, with market caps of $44 billion each, lost a combined $42 billion, overshadowing the modest-to-large gains by smaller L.A.-area companies.

With the exception of entertainment companies, which continue to be slammed by the advertising slump, no one sector has taken it on the chin over the last 12 months including technology. Meanwhile, homebuilding, financial services and defense have held up well, as have a few retailers.

For a corporate base that was all but written off a few years ago, the success of L.A. companies is due to a confluence of factors: Wall Street’s newfound interest in small cap issues a mainstay of the local mix a diversified economy that isn’t vulnerable to troubles in any one industry, and heightened activity in the defense sector, which remains important to Southern California.

“The kinds of companies in L.A. aren’t facing the same types of land mines that other companies are,” said Steven Cochrane, senior economist with economy.com. “All you have to do is go up to the Bay Area and see how the tech companies are faring.”

The biggest percentage increase came from OSI Systems Inc., the Hawthorne-based electronics manufacturer that designs security and medical diagnostics systems. It vaulted 377 percent, to $239 million. Similarly, Long Beach-based Ducommun Inc., a manufacturer of components for military and commercial aircraft, was up 66 percent, to $224 million.

Of the eight companies returning to the top ten, seven were more valuable last week than during the like period a year ago.

Notable winners include Northrop Grumman Corp., whose market cap grew more than 47 percent, to $14.2 billion. The L.A.-based defense company jumped into the number three spot from sixth position last year. Both El Segundo-based Mattel Inc. and El Segundo-based Computer Sciences Corp. each had market cap increases of more than 20 percent both ranking in the top 10.

This year’s top 10 had two newcomers: Wellpoint Health Networks, the Woodland Hills-based managed care company, saw its market cap increase to $11.9 billion, from $6.4 billion a year ago, and Avery Dennison Corp., the Pasadena-based label maker, jumped to $7.1 billion from $6 billion.

Besides Amgen and Disney, there was one other notable loser: Hughes Electronics Corp., a wholly owned subsidiary of General Motors Corp., saw its market value fall by 39 percent, to $10.8 billion.

Top 10 dropouts include Pasadena-based Gemstar-TV Guide International, which fell 78 percent to $3.3 billion, and L.A.-based Spanish language broadcaster Univision Communications, whose decline is mostly the result of its recent proposed acquisition of Hispanic Broadcasting Corp.

On the plus side, the effect of low interest rates and a booming real estate market helped boost the market cap of Calabasas-based Ryland Group Inc., a homebuilding and mortgage finance company, to $1.4 billion, a 125 percent increase from a year ago. Los Angeles-based KB Home rose 87 percent to $2.5 billion.

As building homes has become an increasingly profitable venture, so too has lending to first-time buyers and the mortgage refinance market. Countrywide Credit Industries had a 21 percent bump in market cap, to just over $6.0 billion.

“Lower interest rates are good for everyone in the financial services sector,” Michael Pachter, director of research at Wedbush Morgan Securities. “People borrow more money more frequently and earnings go up, which is what it really comes down to.”

Such activity is fueling growth at Wilshire State Bank, Hanmi Financial Corp., Hawthorne Financial Corp., PFF Bancorp Inc., Apex Mortgage Capital and Cathay Bancorp, which range in size from $71 million to $788 million and have all had market cap increases of more than 46 percent.

Results in the retail sector were mixed. Shoe companies Skechers USA Inc. and Vans Inc. fell 14 percent and 61 percent, respectively. But Westlake Village shoemaker K-Swiss Inc. jumped 93 percent to $291 million.

Two other winners were teen retailer Hot Topic Inc., up 45 percent to $857 million, and 99 Cents Only Stores, which was just under the $2 billion mark last week after climbing 40 percent in the last 12 months. “The retail sector has been awesome because investors are looking for earnings that are stable and growing,” Pachter said. “It’s not unpredictable.”