Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 2, 1992 TAG: 9201020007
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: MAG POFF BUSINESS WRITER
DATELINE: LENGTH: Medium
REGIONALS MIRRORED OTHER INDEXES
Stocks of regional companies, based on a local index, followed in the wake of national markets, climbing to a crest in August, stumbling and then recovering at year's end.Local investors generally shunned stocks, however, believing them to be overvalued. Brokers here said most of their customers were seeking alternatives to low-interest bank certificates.
"It's tracked the markets pretty well," said John C. Parrott II, who compiles the local index for Wheat First Securities.
Starting at 138.68 points at the end of December 1990, the index of 20 regional stocks rose pretty steadily to a high of 166.14 at the end of August. It fell to 145.30 in November before upticking to 159.88 at 1991's end.
Although that's still short of this year's high - much less the record of 199.79 set in September 1989 - the level still is higher than a year ago.
Parrott described it as a "bank-heavy index," with other companies in the furniture and steel businesses. He said the regional index also has many stocks that are cyclical or sensitive to economic conditions.
Even on the national markets, he said, "all of the economically sensitive stocks got pretty restless."
The December upturn, he said, was based on "a pretty good move by GE," which rose 10 points; by USAir Group, up 15 to 18 percent; and by C&S/Sovran Corp., which merged this week with NCNB Corp. to form NationsBank.
Utilities and communications companies Bell Atlantic and Bell South also contributed to the December gain.
Parrott thinks the cyclicals will get some play in the new year. "They are the only cheap ones left," he said, and their move might presage another rise in the market.
Roanoke-area investors, on the other hand, "are being very picky." Parrott said they want "to realize a decent value" despite "a pretty pricey market."
"People are being very careful about choosing stock," according to Parrott. "There's a new appreciation for yield" such as the 5 percent to 6 percent on many utility stocks.
Richard Wertz, vice president at the Roanoke office of A.G. Edwards & Sons, said his customers are looking for alternatives to certificates of deposit, which in recent weeks have tumbled into the 4 percent to 5 percent range.
This drew them to the bond market, utility stocks such as Dominion Resources and American Electric Power, Ginnie Maes and tax-free municipals.
Wertz said recent bond issues by Roanoke, Roanoke County and Henry County were very popular with people in upper tax brackets.
"I didn't see a whole lot of interest in cyclical stocks," Wertz said, because customers felt they were overpriced.
William Nash, manager of the local office of Scott & Stringfellow Investment Corp., said 1991 was a good year for brokers, "primarily attributable to declining interest rates and people being forced to buy alternatives to CDs."
Customers bought utility stocks for their dividend return, he said, but mutual funds were especially popular last year. People wanted conservative funds with a record of solid growth and income.
More than in past years, he said, people took mutual-fund dividends as income instead of reinvesting the money. That's because the fund replaced bank CDs.
Municipal bonds always are popular with upper-income investors, Nash said.
Customers in 1991 were "much more receptive to ideas other than CDs than they were two years ago," he said.
Brokers did well in 1991 as well. All of them said they had level employment and record earnings on a companywide and local level.