Takeovers, turnarounds and technology produced the biggest winners for Washington investors in the first half of the year, but that trio of trends failed to awaken a mid-Atlantic stock market that's been snoozing for more than a year.

Measured by The Washington Post-Bloomberg regional stock index, the average local stock gained a mundane 3 percent over the past six months -- making up for a first-quarter slump with a modest second-quarter comeback.

But the regional index really hasn't gone anywhere since the spring of 1998. The index was in the low 170s then; until last week it still was in the low 170s. The index lost 1 percent over the past 12 months, while the Dow Jones industrial average gained almost 23 percent and the Nasdaq composite index jumped 42 percent.

Stocks of banks and computer services companies -- two major components of the regional economy -- have performed poorly in recent months, and Internet stocks haven't been making the big gains that used to make up for the underachievers.

Regional companies may be stuck in the mud, but investors panning for profits could still come up with a few glittering nuggets in the first half of the year. Here are the big payoffs:

Information Resource Engineering Inc., a small Baltimore software firm that specializes in computer network security, was the biggest winner in the first half, continuing a run that began late last year.

The stock, selling for less than $3 a share only nine months ago, now is selling for more than $30. It's one of the top holdings of Robert Kern, manager of the Fremont Micro-Cap Fund, who said the company is benefiting from the demand for secure electronic commerce.

Supplying its security system to big firms like Cisco Systems Inc., Nortel Networks Corp. and Lucent Technologies Inc., Information Resource Engineering becomes part of the package that companies install to protect transactions on the Internet. After years of losses, the firm produced penny-a-share profits in the last two quarters of 1998 and earned 3 cents in the first quarter of this year, with revenue up 23 percent.

American Mobile Satellite Corp. stock pulled out of a six-month slump in late March and then shot to $20 a share from $5 before it began to cool off.

The Reston firm owns XM Satellite Radio, which holds one of two federal franchises to broadcast a nationwide pay-to-listen radio network. General Motors Corp. and several other big-name investors recently agreed to invest in the service, which is scheduled to go on the air in 2001.

In the meantime, the company is expanding its bread-and-butter business -- two-way mobile communications. It recently signed a $100 million contract with UPS that will begin tracking a package the minute a driver scans its label into a portable check-in device. A tiny radio will immediately broadcast the pickup, delivery and special handling information on that package to the corporate database.

Growing rapidly, though not profitably, the company recently announced plans to sell 7 million shares of new stock to finance growth.

Omnipoint Corp., the Bethesda mobile phone company, and Telebanc Financial Corp., the Arlington Internet bank, were the one-hit wonders of the second quarter. Both stocks doubled as the result of buyout bids.

Omnipoint, the phones of which use a technology that's standard in Europe but not compatible with other U.S. cellular systems, will be acquired by VoiceStream Wireless Corp. Telebanc, which grew from a failing savings and loan into the first all-electronic bank with $1 billion in deposits, will be taken over by E-Trade Group Inc., the big online trading firm.

Nextel Communications Inc. of Reston, another alternative to conventional cellular phones, got a big boost from settlement of an antitrust dispute with the Justice Department over how much wireless communications capacity the firm can own in a given market.

Nextel's phones are the ones with the "walkie-talkie" feature that allows users to push a button and talk to others on the same private network. Construction companies, truckers and other blue-collar businesses were first to adopt the system, but now the phones are being bought by Fortune 500 firms including Andersen Consulting and American Express Co., producing growth that is exceeding analysts' expectations.

MCI Worldcom Inc. recently flirted with buying Nextel, and the company's name is repeatedly linked to other big players in computers and communications. Microsoft Corp. invested $600 million in Nextel a few weeks ago, and in late June the company announced a $278 million investment by cellular magnate Craig McCaw and his family. The McCaws already own 20 percent of Nextel and will exercise options to buy more.

Turnarounds boosted the shares of two of the least familiar stocks on the list of the quarter's winners, U.S.-China Industrial Exchange Inc. of Bethesda and GSE Systems Inc. of Columbia.

Beijing is the real base of operations for U.S.-China Industrial Exchange, which operates a hospital and a medical clinic in China and exports medical supplies and equipment. Its stock has climbed steadily since mid-May when the firm reported its revenue had tripled to $9.4 million and it had earned a $306,000 profit instead of the $2.9 million loss of the previous year.

GSE Systems has now posted three profitable quarters in a row, solidifying a turnaround that resulted in the promotion of Christopher M. Carnavos from chief executive to chief executive and president. GSE creates computer control and simulation systems for running power plants and other complex manufacturing facilities.

Excalibur Technologies Inc. of Vienna, which makes high-powered search engines from retrieving information from databases, signed several new contracts that increased its visibility and stock price. In similar fashion, the attention attracted by studies by HCIA Inc. of Baltimore of the impact of health care reform legislation drew investors to that firm.

PSINet Inc. of Herndon made the list of the quarter's top 10 stocks by riding the tumultuous Internet wave better than the rest of the region's net stocks. PSINet stock tripled in the first 3 1/2 months of the year, then dropped more than 40 percent before the Net stock recovery began in early June.

Like shares of America Online Inc. (which were up 41 percent in the past six months) and other Internet companies, PSINet stock served investors the classic half-full, half-empty glass: PSINet shares are worth twice as much as they were on Jan. 1, but 25 percent less than they were at their peak.

The worst-performing stocks for the first half share records of deteriorating earnings -- or worse, growing losses -- and failure to live up to their promises.

The best example -- or maybe the worst -- is a stock at the bottom of the list: Fuisz Technologies Inc., whose process for making drugs that dissolve instantly on the tongue has long looked like a potential winner but has never delivered.

Veteran drug company executive Kenneth W. McVey, who was brought in to turn the company around, quit in May. Founder Richard Fuisz announced he's hiring a consultant to figure out what the company should do next.

The answer certainly can't be the futile Fuiszdrugstore.com that showed up on the Internet last year, hawking nonprescription nostrums. Most convenience stores offer more variety, and the graphically challenged site now carries an "Under Construction" sign. Fuisz's chances of competing against the powerhouse online drugstore ventures can't be any better than its efforts to challenge the giant drug makers.

Ups and Downs

Here is a look at the best and worst performers among local stocks for the first half of the year:


Share price %

Company on June 30 change


Resource $30.12 1/2 223%


American 16.18 3/4 212%

Mobile Satellite

Omnipoint 28.93 3/4 211%


Industrial 6.62 1/2 141%


GSE Systems 6.00 140%


Share price %

Company on June 30 change

Fuisz Technologies 3.31 1/4 - 74%

Axent Technologies 11.12 1/2 - 64%

Spacehab 5.12 1/2 - 51%

Landamerica Financial 28.75 - 48%

AceComm 3.31 1/2 - 48%

The Big Guys

How the area's 10 biggest companies fared:

Share price %

Company on June 30 change

Mobil $98.75 13%

Lockheed Martin 37.25 - 12%

U.S. Airways 43.56 1/4 - 16%

Marriott International 37.37 1/2 29%

Columbia Energy 62.68 3/4 11%

U.S. Food Service 42.62 1/2 - 13%

Gannett 71.37 1/2 11%

General Dynamics 68.87 1/2 17%

Sodexho Marriott 27.68 3/4 - 31%


Host Marriott 8.12 1/2 - 22%

Source: Bloomberg Business News