IPOs Boost Confidence But Market Future Up for Grabs

Wall Street West

by Benjamin Mark Cole

Wall Street always has been fertile ground for opinion making, but the choppy market of the last two years is producing a bumper crop of diverse views on where stocks are heading.

Take Dan Rubin, who manages money at RIG Microcap LP in Westwood. Last week, he called for the Dow to smash through 11,000 this summer, and for the Nasdaq to reach 2,000 (the Nasdaq last week traded around 1,700).

The sunny outlook can be foretold, in part, by the blossoming Initial Public Offering market, said Rubin, who also runs an investment banking shop. “This week there are seven IPOs coming. Can you remember the last time we had a week like this?” he asked. This year’s IPOs have done well in general, with 30 percent to 40 percent gains common. “When the IPO market comes back, that always leads the stock market,” Rubin said.

With a decidedly gloomier view is Chip Hanlon, who runs the Unfunds Inc. money shop in Huntington Beach. Surging state and federal deficits, along with an epic shift in investor sentiment, could foretell a generation of bearishness, Hanlon predicted.

U.S. stock markets tend to be characterized by very long trends, such as the ursine market of 1967-82, and then the big, long bull, which ran from 1982 to 2000. “According to Dow Theory, the market moves in long, slow waves from periods of extreme over-valuation to extreme under-valuation,” Hanlon said. The 1970s were the last under-valuation nadir, and the late 1990s, the last boomy top. Hanlon said the stock market likely has crested again and is into initial stages of another sustained bear wave.

Old School Value

One guy who has seen a few of those waves is Fred Astman, money manager with First Wilshire Securities in Pasadena (and long ago of the One Wilshire Building in downtown Los Angeles, hence the name). Next week, Astman turns 80, with nearly four decades under his belt as money manager. Before that, he counted beans for Lockheed in Burbank, and also invested privately.

“I was making more investing than I was at Lockheed, so I left,” Astman recalled last week. “That was in 1962.”

Astman liked “cheap” stocks back then and still does stocks with good earnings growth but low price-earnings multiples. Such finds are usually small caps that are overlooked and not researched on Wall Street. Astman’s methods have gone in and out of style; now, he is back in. “We had a nice run here, up 18 percent this year,” he said.

As a group, Astman is a fan of many local bank stocks, including Hanmi Financial Corp., Nara Bancorp, Wilshire State Bank, and California Center Bank. Many of these have been discovered by Wall Street and are enjoying strong runs. Astman’s right-hand man, Scott Hood, noted last week that California Center Bank is preparing to become listed on the Nasdaq, a jump up from the over-the-counter bulletin board, which should increase the stock’s visibility and liquidity.

Hood and Astman also like Impac Mortgage Holdings Inc., currently offering a 14.8 percent dividend yield.

Last week, Astman was sending out invitations to his 80th birthday party. He says he is “turning 40 a second time.” Why is he still working? “My wife wants me out of the house,” Astman said. “And I live two miles from the office. Where else would I go?”

Big Phone Deal

Mexico has a lot of people, but only two national cell phone providers, and one of those was sold recently, in a transaction engineered by Allan Marks, deal lawyer with Milbank, Tweed, Hadley & McCloy in downtown Los Angeles.

Marks had a tricky assignment his client was San Diego-based Qualcomm Inc. The San Diegans were owed lots of money by Mexican cell phone operator Pegaso Telecomunicaciones S.A. de C.V., but Pegaso was in a losing war for market share with Mexican cell phone giant Telmex. Pegaso needed an infusion of capital and smarts, at least from Qualcomm’s point of view.

Luckily for Qualcomm, the Spanish phone service, Telefonica Moviles SA, wants to set up cell phone service throughout Latin America. Pegaso provided the platform to penetrate Mexico, and so the Spaniards entered into a complicated deal that valued Pegaso at $1.36 billion. Pegaso has a 20 percent national market share in Mexico. Marks jetted between London, New York, San Diego, Mexico City, Miami and Madrid to pull the deal together.

The deal provided for immediate partial repayment of $200 million of Pegaso IOUs to Qualcomm and a more secure refinancing of an undisclosed amount of remaining debt, Marks said.

Quick Takes

It may sound Orwellian, but thanks to Westside venture capital shop Kline Hawkes & Co., the Los Angeles County Sheriff’s Department will soon be able to download your DMV photo and other online information into their squad cars. Kline Hawkes has backed the Santa Fe Springs-based IP MobileNet Inc., which is providing software to the law enforcement agency, to turn squad cars into “rolling offices connected to a LAN (local area network),” said Kline Hawkes’ Jay Ferguson…

They say Los Angeles is a wacky town, but how about midtown Manhattan, where on Lexington Avenue resides The Astrologers Fund? According to a recent issue of its newsletter, “The Sept. 11 attacks were not a surprise to anyone who seriously studies terrorism or astrology.” This was dutifully recorded in a recent issue of Barron’s, also edited in New York. Astrologers manager Henry Weingarten further advises, “We expect markets higher in the fall, and foresee light at the end of the tunnel as Saturn-Opposition Pluto ends May 2002!”…

Still tough sledding for Torrance-based Imperial Credit Industries Inc., the diversified business lender that was so hot on Wall Street just a few years back. Now comes word Imperial is being delisted by Nasdaq and will try to trade on the over-the-counter bulletin board. The stock has failed to trade above $1 a share consistently, a minimum set by the Nasdaq…

Los Angeles-based brokerage Jefferies Group Inc. continues to be a strong stock, trading last week in the $50 a share range, up from under $30 shortly after Sept. 11. Jefferies is rising while other brokerages, such as Merrill Lynch, have weakened amid investor concerns about which brokerage New York State Attorney General Eliot Spitzer will target next.

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at

[email protected].