Although the stock markets overall enjoyed a banner year in 2023 – the S&P 500 was up 24% – Los Angeles area stocks, with a few notable exceptions, had a far more modest year.
And while the S&P 500 saw its large gain, a handful of companies carried much of that weight; L.A.-area companies, similarly, varied widely short of its all-stars. The No. 1 local gainer was Virco Manufacturing Corp. in Torrance, which saw prices rise by 167%.
For this year, analysts are hoping that tailwinds formed near the end of last year will continue and further ease lingering concerns about the state of the U.S. economy. This followed a first half of the year that saw continuing inflation, which resulted in multiple interest rate hikes by the Federal Reserve. With cooling inflation and rates unchanged since June, that picture began to improve in the second half of 2023.
“For 2023, obviously with all of the Fed hikes, everybody was really caught off guard and we had a lot of clients who were lucky to be in (Treasury bills) and gain 5% on the year,” said Rick Barragan, a market manager for the J.P. Morgan private bank in Los Angeles.
“Going forward for 2024,” he continued, “I think there’s three key things that we’re really looking at that will help the market broadly. We certainly think inflation is fading. The consensus is that the Fed is going to start to cut rates. If we continue to have strong earnings and growth at the corporate levels, that’s another strong tailwind.”
All about tech
Tech carried a lot of the weight as its companies largely recovered from their losses in 2022. Locally, Santa Monica-based Snap Inc. saw its share valuations grow by more than 89% last year, closing out December at $16.93 per share.
“We saw a lot of resurgence among the tech world and I think Snap certainly benefitted from that,” said Sahak Manuelian, managing director and head of equity trading for downtown-based investment firm Wedbush Securities. “Snap I think falls into this trend where we saw a lot of these tech stocks that got so beaten up in 2022 really come back this year.”
In fact, tech stocks recovered so strongly last year that the so-called “Magnificent Seven” – Apple, Alphabet, Meta, Microsoft, Amazon, Nvidia and Tesla – largely carried the S&P 500’s gains. While none are based locally, Microsoft’s blockbuster acquisition of Santa Monica game developer and publisher Activision Blizzard in October for $69 billion preceded a significant gain in the company’s stock value, which by the end of the year had climbed by nearly $50 per share since the deal went through.
Glendale’s LegalZoom.com was another strong tech performer, with share prices rising by 46% on the year.
Biotech climbing
After a generally low-performing year, biotech began a comeback late in the year, with some companies erasing losses and gaining in price by the end.
Amgen Inc., the Thousand Oaks-based biopharmaceutical company, ended the year up more than 13%, largely on the heels of its acquisition of Horizon Therapeutics in September for $28 billion. Westwood’s Puma Biotechnology Inc. also saw a modest price gain of 2.7% on the year after experiencing two significant dips.
Meanwhile, Pasadena-based Arrowhead Pharmaceuticals Inc. (down 25%), El Monte’s Fulgent Genetics Inc. (down 2.9%), Monrovia-based STAAR Surgical Co. (down 37%) and ImmunityBio Inc. in Culver City (down 1%) did not quite capitalize on the turnaround, but better days may lie ahead, Manuelian observed.
“Biotech, specifically the small- and mid-cap firms, had a pretty awful year up through October,” he said. “We’ve seen a big surge in biotech for the last six weeks or so, so we’ve seen some perform better. Arrowhead benefited from that in December, although it had a pretty lackluster year, along with most of that group for the last 24 months quite frankly.”
Disney ekes gain
In a year full of public relations battles, Burbank’s stalwart Walt Disney Co. saw a 4.3% gain on the year – certainly not the loss its detractors have wished for.
“Nonetheless, an extreme laggard compared to what some of the other names in this space have done,” Manuelian said. “(Former Chief Executive) Bob Iger came back, and he’s had a tough task. I think he’s got to chop this up and make some sales of portions that are less profitable than others.”
On top of the familiar intellectual property, Disney’s brand has bloated over the past decade or so to include Marvel and 20th Century Studios. Additionally, the company also controls ESPN and Hulu, the latter of which it upped its stake in last year. Share prices have struggled periodically, which has prompted shareholder and activist investor Nelson Peltz into not one but two proxy challenges to land a seat on Disney’s board.
After Iger’s return, there has been speculation he plans to trim the company and focus more on its core products, including its theme parks. ESPN, the sports broadcasting network, is widely believed to be on the table.
“I think that’ll probably happen at some point. I wouldn’t be surprised if they did that,” Manuelian said. “It’s become such a large organization. Since Iger left the first time, we saw what a mess it started to become, and I think they need to rein things in. I think that’s why they brought Iger back.”
Banks up and down
In a year where a handful of banks made headlines for the wrong reasons, the industry as a whole was a bit of a mixed bag among the middle players. That said, L.A.-area banks performed generally well.
East West Bancorp Inc. in Pasadena largely erased its spring downturn and posted a respectable 13% gain on the year. Downtown-based Cathay General Bancorp likewise finished up by about 13% and Koreatown’s Hope Bancorp Inc. broke even.
Meanwhile, in other financial services, Westlake Village mortgage company PennyMac Financial Services Inc. was up 54%.
“Financial services were interesting,” Barragan said. “There were some strong performances within the sector.”
