Rebounding from a lackluster fourth quarter, publicly traded direct marketing service supplier stocks rocketed in price in the first three months of 1998 and pulled the sector's performance nearly even with that of the overall stock market.
The 40 companies in the four supplier segments tracked by Gruppo, Levey & Capell Inc. in its GLC Portfolio saw their stock prices rise an average of 28.9% from the beginning of January through March 31, [TABULAR DATA OMITTED] producing nearly all of the sector's 12-month gain of 32.8%. The S&P 500 increased a "paltry" 13.5% during the quarter and jumped 45.5% for the year ended March 31.
Each segment recorded a hike in average stock price. Interactive suppliers led the way with a 59.3% average gain for the three-month period, as both Broadvision and Open Market reported reduced losses, higher revenue and strong prospects for more growth.
Marketing service suppliers continued their impressive performance, buoyed by the price run-up at Metromail following its acquisition by Great Universal Stores. And telemarketing services (which had turned in five consecutive down quarters) did well, as Telespectrum Worldwide's stock nearly doubled in price after it announced a restructuring plan.
Gains in the first quarter stopped an overall slide in service supplier stocks, which in the prior six months had seen an average price decrease of 15%. The impact of the turnaround was particularly acute in telemarketing; although prices increased for only two of the 11 companies' issues in the segment, signs of improving financial results slowed the average price decline.
Meanwhile, marketing services companies' stocks remained popular among investors, as prices of nine of the 15 firms in the segment recorded a 12-month gain of at least 50%.
Harry Chevan is senior vice president of research at direct marketing investment bank Gruppo, Levey & Capell Inc., New York.
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