Inside Wall Street
BIG FAVORITES IN SMALL CAPS
Don't cry for small-capitalization stocks, which got a sound drubbing last year. Investment pro F. Van Kasper, a small-cap advocate, says they are due for a smart snapback in 1995. Even companies that had earlier posted record earnings got knocked in 1994. "That makes the group even more attractive, with many stocks way off their highs," he argues. He thinks healthy earnings will keep rolling in 1995 and 1996.
Van Kasper, who heads a San Francisco investment bank, Van Kasper & Co., did well last year: His small-cap portfolio, which gained 3.2%, outpaced the Dow's 2.1% rise. Both the NASDAQ and Value Line indexes, by contrast, slumped some 6%. Part of Van Kasper's performance was due to a 191% leap by one of its picks--Macromedia--and an 82% jump by First Team Sports. So what are Van Kasper's choices for 1995?
Some are hardly household names: Activision (ATVI), a maker of video and computer games; McFarland Energy (MCFE), a conservatively managed oil-and-gas producer with more than 300 wells in California; Neurobiological Technologies (NTII), a biopharmaceutical outfit with a network of scientist-shareholders; and Odwalla (ODWA), a large fresh-juice company serving Northern California and Washington.
Activision is big in adventure videos and computer games. Some of its popular titles are Pitfall, Kaboom, and Return to Zork. In early January, the company signed a pact with Japan's Bandai, which will pay royalties of up to $5.5 million for Japanese versions of Return to Zork. Van Kasper expects the company to land in the black for the fiscal year ending Mar. 30, 1996, with estimated earnings of 30 cents a share, vs. losses in 1994 and 1995.
McFarland Energy, which just last September won a lawsuit against Chevron, bringing in $16 million in compensatory damages and $30.9 million in punitive damages, is expected to report earnings of 19 cents for 1994 and 35 cents in 1995. Van Kasper says it's one of the best energy plays around.
He is also high on Neurological Technologies thanks to a product now in clinical tests: corticotropin releasing factor (CRF), which Van Kasper says reduces swelling in cosmetic surgery. "This will be a big product for the company in two years," he says.
Odwalla produces more than 20 different fruit and vegetable drinks with "just-squeezed flavor," notes Van Kasper, who believes Odwalla's earnings will jump to 30 cents in 1995 and 50 cents next year, up sharply from last year's 12 cents.
Van Kasper says all four stocks offer "ground-floor bargain opportunities."BY GENE G. MARCIAL