Subscribe to Inc. magazine

The Year Of The Fast-growth Bear

When the Big Board sniffles, it's the INC. 100 that gets pneumonia. This year's 16% drop can in part be blamed on the earnings ailments of larger companies.
Advertisement

Once again, INC. has engaged in the fruitless exercise of purchasing a hypothetical $100 worth of shares of each company on the INC. 100 list and seeing how the paper investment would have fared -- this time, from March 16, 1983, to March 15, 1984. We say "fruitless" because, even with actual greenbacks, the exercise can't be done. After all, no one knows a year in advance which companies will be admitted to the next distinguished family of fastest-growers. Still, the outcome is not without its academic interest.

Sad to say, INC. chalked up the poorest result among four stock market indexes -- although not nearly by the largest degree in the five-year history of the INC. 100. Two years back, in the recession of 1982, INC. 100 stocks shed a hefty 27%. But last year, they led the batch with a gain of 72%. This year, they were down again, by 16%, despite gains in other averages -- which shows that fast sales growth alone does not a stock market winner make. As has been pointed out elsewhere in this issue, 1984's median compound annual sales growth rate was a hefty 101%; yet the INC. 100 median stock market move was a loss of about 12%.

The current batch is distinctive in the unusually high number of stocks that entered the market via initial public offerings in the course of the year. No fewer than 91 are traded over-the-counter, usually the market of necessity for young, lightly capitalized IPOs. While IPOs were a hot arena for a few months, they cooled off markedly toward winter, and many issues dropped well below their offering price. Of the 38 IPOs on the list, only 8 managed to hold a gain at the end.

Indeed, anybody who stubbornly husbanded stocks of smaller-cap companies can probably provide firm, if dismayed, witness that the bear market started as far back as a year ago. Many stocks of smaller companies topped out way back last summer, while the big blue chips of the Dow Jones Industrials went on to set a new all-time high in November of 1983.

Unlike previous years, high interest rates couldn't be blamed for stifling profits in 1983. Rather, the prime culprit was the fear of a lack of working capital. The prominent case of Osborne Computer Corp. was typically unsettling, as the private company soared to nine-figure sales in 18 months, then couldn't even pay its bills to vendors. Ironically, the public offering which that company was about to undertake could well have saved it. Nevertheless, investors took the lesson of Osborne to be that thinly capitalized fast growth was just too frightening.

In other instances, overcrowded markets hurt quarterly earnings growth, which in turn sent stockholders scurrying for the exit. Many of the abandoned stocks were in technology industries, a factor that dragged INC.'s results down even beyond the general run of the speculative over-the-counter market, whose average alsoi declined significantly. Of the 34 INC. 100 companies involved in computers and data processing, a scant half dozen managed stock market gains, despite their heady sales growth rates. The atmosphere for technology investment turned gloomy well beyond what conditions warranted. On the other hand, even astute investors are having trouble picking the probable stayers among computer companies.

Then, too, the troubles of larger, Big Board companies like Texas Instruments, Coleco Industries, and Digital Equipment didn't help the newer entries, either, even though the latter can be quicker to re-adjust their marketing strategies and product lines. It will undoubtedly take the investment community a while to under stand the changing nature of small businesses' approach to marketing, just as it took many small businesses themselves time to appreciate the compelling nature of that force.

Even so, it is encouraging to note that the biggest winner, Byers Communications Systems Inc. (#74) -- up 148% -- is in the high-technology business. And, as we have seen many times, things can change mighty fast. Last year, for example, it was the sorry oils that were the INC. 100's albatross; this year, four of seven oil and gas issues were able to post gains against the trend -- and none was a takeover candidate. One, Yankee Oil & Gas Inc., took second place with a profit of 79%. The oil group's performance, at least to some degree, gives substance to our closing thought last year, when we optimistically noted that "it is not beyond the realm of possibility that . . . this group could lead next year's INC. 100 gainers."

Viewing the litter of 73 losers, we offer no such solace this time, except to note that if the record growth rates of the 1984 INC. 100 can't be converted to solid pershare earnings over the.months to come, either the economy is more troubled than it seems, or newly public small-business management still has a lot to learn. Chances are that neither is entirely true. In which case investors should perhaps be taking a second look.

INC. 100 MARKET PERFORMANCE

1984 $100

Company (symbol/exchange) rank 3/83 3/84 Worth

1. Byers Communications (BYCM/O) 74 $7.88 $19.50 $247.62

2. Yankee Oil & Gas (YNK/A)n1 2 7.45 13.38 179.45

3. Independence Health (IHPI/O)n29 7 13.44 23.50 174.88

4. Health Extension Srvds. (HLP/A) 99 10.13 17.50 172.84

5. Electro-Kinetic (EKSIA/O)n28 68 1.38 2.38 172.73

6. Servamatic Solar (SSSI/O)n2 18 1.94 3.25 167.74

7. U.S. Health Care (USHC/O)n2 91 15.22 22.50 147.81

8. Concept Develop. (CDII/O)n3, n31 51 14.64 21.00 143.41

9. Helionetics (HILX/O) 64 14.81 20.75 140.08

10. Movie Systems (MOVSC/O)n4 96 2.37 3.25 137.29

11. Wedtech (WEDT/O)n27 52 15.88 21.50 135.43

12. Chemfix Tech. (CFIX/O)n5 90 2.50 3.38 135.00

13. Doran Energy (DORE/O) 56 1.88 2.50 133.33

14. Home Depot (HOMD/O)n6 26 15.00 19.50 130.00

15. Andros Analyzers (ANDY/O) 79 6.13 7.75 126.53

16. JP Industries (JPII/O)n30 50 10.00 12.50 125.00

17. Ultimate (ULT/A)n7 3 13.08 16.25 124.20

18. Emulex (EMLX/O)n8 4 14.75 18.00 122.03

19. Kloss Video (KLOS/O) 31 6.88 8.25 120.00

20. Comair (COMR/O) 59 9.88 11.75 118.99

21. Texas Energies (TXEN/O) 81 2.75 3.25 118.18

22. AGS Computers (AGSC/O) 82 18.63 21.50 115.44

23. Info. Resources (IRIC/O)n9 15 22.50 24.50 108.89

24. Tender Loving Care (TLCI/O)n28 54 5.69 5.88 103.30

25. Nugget (NUGO/O) 43 0.97 1.00 103.23

26. ASK Computer (ASKI/O)n10 57 14.94 15.25 102.09

27. Distributed Logic (DLOG/O)n25 48 10.38 10.50 101.20

28. Micom Systems (MICS/O)n11 61 34.88 34.75 99.64

29. Eaton Financial (EATO/O)n28 95 8.19 8.00 97.71

30. Consul (CNSL/O) 6 13.56 13.25 97.70

31. Scientific Leasing (SG/A) 83 25.81 24.50 94.92

32. Nautilus Enviromed. (NENV/O)n29 89 1.75 1.64 93.43

33. Lane Telecommun. (LNTL/O)n30 100 7.50 7.00 93.33

34. Endevco (ENDV/O)n29 1 5.31 4.88 91.76

35. Fibronics (FBRX/O)n29 45 7.50 6.88 91.67

36. Centuri (CENT/O) 39 2.47 2.25 91.14

37. Data Switch (DASW/O)n12 34 22.56 20.50 90.86

38. Biomet (BMET/O)n13 63 10.81 9.75 90.17

39. Zitel (ZITL/O)n31 9 10.19 9.00 88.34

40. Cincinn. Microwave (CNMW/O)n31 33 10.88 9.50 87.36

41. BRAE (BRAE/O) 11 13.25 11.50 86.79

42. Rexon (REXN/O) 22 14.00 12.00 85.71

43. Genentech (GENE/O)n14 62 41.13 35.00 85.11

44. Ciprico (CPCI/O)n26 37 13.25 11.00 83.02

45. Andover Controls (ANDO/O)n30 88 10.00 8.25 82.50

46. Comp-U-Card Int'l. (CUCD/O)n28 87 21.38 17.50 81.87

47. Standun (SDUN/O)n15 85 9.60 7.75 80.73

48. HCW Oil & Gas (HCWO/O)n30 36 12.88 10.25 79.61

49. Continental Health (CTHL/O)n23 70 9.75 7.75 79.49

50. ComputerCraft (CRFT/O)n27 14 9.13 7.25 79.45

51. Amber Resources (AMBR/O) 92 0.81 0.63 76.92

52. Phoenix American (PHXA/O)n16 73 11.06 8.50 76.84

53. Quality Micro Systems (QMSI/O) 38 20.88 16.00 76.65

54. Kaypro (KPRO/O)n27 42 10.31 7.88 76.36

55. Compucare (CMPC/O)n30 80 15.00 11.25 75.00

56. Genex (GNEX/O) 23 17.94 13.38 74.56

57. Terrano (TRNO/O)n25 53 7.50 5.50 73.33

58. Tandon (TCOR/O)n17 20 19.25 14.00 72.73

59. C.P. Rehab (CRHB/O)n18 69 16.50 12.00 72.73

60. ISC Systems (ISCS/O) 40 17.94 13.00 72.47

61. Forum Group (FOUR/O)n19 98 7.13 5.13 71.93

62. Valex Petroleum (VALP/O) 93 0.66 0.47 71.43

63. Atlantic S.E. Airlines (ASAI/O) 10 12.63 8.75 69.31

64. Novan Energy (NOVN/O) 32 0.38 0.25 66.67

65. Medical Graphics (MGCC/O) 49 11.25 7.50 66.67

66. Crime Control (CRIM/O) 58 18.00 11.75 65.28

67. Avant-Garde Comp. (AVGA/O)n25 72 23.75 15.25 64.21

68. BSN (BSN/A) 65 7.31 4.63 63.25

69. Onyx-IMI (ONIX/O) 16 10.00 6.13 61.25

70. Polymeric Resources (POLR/O) 86 6.25 3.75 60.00

71. Protocol Computers (PCII/O)n28 13 12.06 7.00 58.03

72. Datasouth Comp. (DSCC/O)n27 47 11.88 6.63 55.79

73. Biosearch Med. Prods. (BMPI/O) 60 11.88 6.63 55.79

74. Altos Computer (ALTO/O) 28 22.00 12.25 55.68

75. Interand (IRND/O)n25 66 18.25 10.00 54.79

76. TeleVideo Systems (TELV/O) 8 22.88 12.38 54.10

77. Publishers Equipment (PECN/O) 29 12.50 6.75 54.00

78. BGS Systems (BGSS/O_n25 71 23.50 12.50 53.19

79. Jeffrey Martin (JFRY/O)n24 75 14.63 7.63 52.14

80. NBI (NBI/N) 97 41.13 21.38 51.98

81. Scientific Labs (SILA/O)n20 77 2.97 1.50 50.53

82. Applied Circuit (ACRT/O)n27 12 11.00 5.50 50.00

83. ZyMOS (ZMOS/O)n26 35 11.38 5.50 48.35

84. Pope, Evans & Robbins (PER/A) 55 14.69 6.63 45.11

85. Lifeline Systems (LIFE/O)n26 24 14.25 6.00 42.11

86. Margaux Controls (MRGX/O)n25 21 17.50 7.25 41.43

87. AM Cable TV Indust. (AMTV/O) 94 7.00 2.88 41.07

88. Cybermedic (CMED/O)n26 76 1.06 0.41 38.24

89. TVI Energy (TVIE/O) 46 4.50 1.69 37.50

90. Healthdyne (HDYN/O)n21 5 27.08 9.88 36.46

91. Video-Connection (VIDC/O) 44 5.69 2.00 35.16

92. Electro-Biology (EBII/O)n22 30 23.92 8.25 34.49

93. Masstor Systems (MSCO/O) 41 18.13 6.25 34.48

94. Home Health Care (HHCA/O) 25 24.13 8.25 34.20

95. Pizza Time Theatre (CHKY/O) 17 16.75 5.25 31.34

96. Psych Systems (PSYC/O) 19 13.13 3.75 28.57

97. Nutri/System (NTR/N) 78 26.63 7.50 28.17

98. Teleconcepts (TCC/A)n23 84 28.00 7.00 25.00

99. Diasonics (DNIC/O) 27 22.38 4.88 21.79

100. Harris & Paulson (HAPI/O) 67 13.88 1.38 9.91

n1 4:3 split, 7/83;

n2 50% div., 5/83 -- 3:2 split, 9/83

n3 5% stock div., 3/84

n4 4:3 split, 8/83

n5 3:1 split, 7/83

n6 2:1 split, 6/83

n7 3:2 split, 9/83

n8 2:1 split, 2/84

n9 2:1 split 8/83

n10 2:1 split, 9/83

n11 2:1 split, 3/83

n12 2:1 split, 6/83

n13 2:1 split, 3/83 -- 2:1 split, 7/83

n14 3:2 split, 3/83

n15 split, 8/83

n16 2:1 split, 9/83

n17 2:1 split, 4/83

n18 100% stock div., 3/83

n19 2:1 split, 8/83

n20 recapitalized, 1:10, 6/83

n21 3:2 split, 5/83

n22 3:2 split, 3/83

n23 first public 4/83

n24 first public 5/83

n25 first public 6/83

n26 first public 7/83

n27 first pubild 8/83

n28 first public 9/83

n29 first public 10/83

n30 first public 11/83

n31 first public 12/83

Last updated: May 1, 1984




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: