During the great bull market of 1982-'83, securities of companies located in the greater Washington area outperformed the Dow Jones average by two to one, with housing-related and high-tech stocks leading the way.
In the year that started Aug. 13, 1982, the Dow Jones average of 30 industrials rose 52 percent, peaking at a record 1,248.30 on June 16 of this year. As of Friday, the blue-chip index had slipped back 5.2 percent from that high, to close at 1182.83. The Johnston Lemon Index of local businesses climbed 119 percent during the same period. Since peaking on July 26, it has fallen by 4.8 percent and now stands at 489.65.
The 10 best performers for the year on a list of 100 selected area securities include four high-tech stocks, two builders, two furniture companies, a drug store chain and a health care chain. The worst performers--and only one of these had negative earnings--include four local utilities, a real estate investment trust, an insurer, a railroad, a laboratory and an oil and gas investment company.
(A list of the 100 selected stocks appears on G5. All prices on the chart are adjusted for stock splits, which proved numerous as stock prices mounted. A handful of companies even split twice.)
The best performance was a phenomenal gain of 550 percent, while the worst was a decrease of 12.50 percent. The median gain in price was 90 percent.
The top performer was Washington Homes Inc. of Waldorf, Md. After a poor showing in 1982, the builder of low- and moderate-priced homes bounced back in late 1982 and early 1983 as lower interest rates made housing once again affordable.
Also benefiting from the end of the recession were the Ryland Group, another builder, Rowe Furniture, a Richmond-based manufacturer, and Helig Meyers Co., a Richmond furniture retailer.
Dart Drug Corp. chalked up the second best record, thanks to the success of its two subsidiaries, Crown Books and Trak Auto, which were spun off this year and have done very well with their first public offerings. The parent corporation owns 71 percent of Trak and 34 percent of Crown. Dart had achieved an even more spectacular percentage gain before its stock began falling precipitously last month after the Securities and Exchange Commision questioned Crown Books' accounting practices and forced a delay in its initial offering. From a June high of $148, Dart has fallen 35 percent.
Of the high-tech companies, whose stock prices more than tripled, BDM International of McLean was the leader, with a 242.5 percent increase. The professional services corporation does most of its work for the U.S. Department of Defense. As such, it has benefited from the administration's emphasis on military spending.
VSE Corp. performs services such as studies of maintenance systems and cataloguing drawings for the military. Investors were attracted by the fact its stock was selling under book value, analysts said. CACI Inc., another hot performer, is also involved in computer systems for the Defense Department.
"Investors around the country fell in love with the military this year," said John Sanders of Wachtel & Co., "something Washingtonians have always known." The computer craze also helped Scope Inc., which specializes in electronic warfare and walkie-talkies.
Manor Care Inc., a diversified owner and operator of nursing homes, hospital and hotels, reflected the boom and rising profits in health care services.
Just one stock on the list of 100 proved an outright loser for investors during the greatest bull market since World War II. LogEtronics Inc. of Springfield, which makes computer imaging equipment, had a poor showing largely due to its expansion in 1982 through the acquisition of four computer-imaging companies. Its interest costs on the financing increased by $1 million and the firm lost nearly $2 million last year.
This area's four major utilities showed little growth.
Bill Smith of Johnston Lemon says the relatively small decline in interest rates has held down the prices of utility stocks, which act inversely to interest rates.
Hotel Investors Inc., a real estate investment trust, was held back by a high volume of non-performing assets.
Most of the stocks of large, well-known Washington corporations--the Federal National Mortgage Association, Woodward & Lothrop, The Washington Post Co.--fell into the second tier, about doubling in price during the year.
A few of the glamor stocks that shot up early in the fall of 1982 have since fallen back, with MCI the most notable example. With a run-up of 96 percent in the first three months, it nevertheless finished with a 127 percent gain for the entire year. Flow General, on the other hand, skyrocketed by 98 percent during the fall, only to drop back to an annual gain of 59 percent. Some of this decline in the rate of growth may represent profit-taking, and some may represent a slowing in earnings due to capital reinvestment.
Yet most of the Washington wonders managed to maintain their initial gains throughout the year. "We may be in a lull now," said Patrick C. Ryan, vice president and manager of Johnston Lemon, "but this is just the beginning of another bull market . I expect the Dow Jones to double its present level."