Market downturn taking toll on Md. Shares of state firms mirror broad decline

index closes at 172.54

Slump called 'appropriate'

Black & Decker, Ciena, other area stocks have had rocky third quarter

Wall Street

September 01, 1998|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Stocks in Maryland-based companies declined yesterday -- much like they have since July -- following a steep drop in the rest of the market.

The Sun-Bloomberg Maryland Index fell 10.17 points yesterday to 172.54, with only seven of the 100 firms posting increases in their share prices. Eleven companies were unchanged.

The index is down 29.9 percent from its all-time high of 246.23, which it reached May 4.

Some analysts said the decline makes it a better market to buy quality companies at a low price. Others say the correction is a given, considering the prices some companies are demanding.

"It's appropriate," said James Hardesty, president of Hardesty Capital Management in Baltimore. "We have any number of stocks in Maryland that are selling at 10 times their earnings.

"We're now reaching levels that represent fair value."

Ciena Corp., which last week was forced to renegotiate the terms of its merger with Tellabs Inc., led yesterday's descent, falling $7.1875 to $28.125. It was followed by Legg Mason Inc., which fell $4.625 to $47.50.

Other big losers yesterday included Black & Decker Corp., Healthcare Financial Partners Inc., Medimmune Inc. and Comsat Corp.

Charles Allmon, publisher of Growth Stock Outlook, a newsletter based in Chevy Chase, said companies in Maryland are just as likely as any others to be hurt in the market.

"Some of these stocks in Maryland, such as Ciena, can easily drop 75 percent," he said. "We're in a bear market for an unknown duration. If I were to make a guess, I don't think investors have seen anything yet."

Maryland companies have been hit hard by a market downturn that has lasted much of the third quarter. Since July 1, only seven of the 100 companies in the Sun-Bloomberg Maryland Index have seen their shares go up. One, GSE Systems Inc., has remained unchanged.

Some of the companies that have been hit hard by the market fluctuations include Caliber Learning Network Inc., which has declined 67.48 percent since July 1; Entremed Inc., 49.06 percent; Integrated Health Services Inc., 48.3 percent; Sylvan Learning Systems Inc., 34.73 percent; Black & Decker Corp., 31.15 percent; Jos. A. Bank Clothiers Inc., 27.27 percent; Provident Bankshares Corp., 23.73 percent; Mercantile Bankshares Corp., 19.57 percent; McCormick & Co. Inc., 18.64 percent; and Lockheed Martin Corp., 17.3 percent.

Despite it all, "our general feeling is that the market is pricing earnings at a more reasonable level today than earlier in the year," said Doug Eby, president of the Torray Company, a money management firm in Bethesda.

"It is fitting with history," he said. "We don't see it as a precursor to any downturn in the economy, but as a reduction in the excess valuations placed on equities in general."

Even after a day like yesterday, there are those who are even more positive.

Jerry Scheinker, senior vice president of investments for Legg Mason, remains bullish on the market.

"It's like buying something on sale," he said. "Usually when you're scared the most, that's the time you should be buying a company."

But yesterday, there were far more naysayers.

"In July, when averages reached their zenith, no one was concerned about risk or value," Allmon said. "But where is the bottom? Nobody knows."

Pub Date: 9/01/98

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