‘91-’92 Business. A look back and a look ahead. : Year of Havoc for Industry Groups

When savvy Wall Streeters warned a year ago that 1991 would be a “stock-picker’s market,” they weren’t kidding.

Traditionally, when investors begin to anticipate an economic recovery, they flock to the shares of companies that should benefit most--the cyclical businesses that rise and fall with consumer and business spending trends.

But the recovery flickered on and off all year, sowing massive confusion on Wall Street. The result: The year’s big winners and losers among stock industry groups showed no discernible pattern.

Ultimately, it was a bad year for those who prefer to follow trends rather than root out solid individual stocks:

* Some cyclical groups soared in 1991, led by home builders, which benefited from a year-end surge. The average home builder’s stock rose 90.1% for the year after falling 19.5% in 1990. Other cyclical winners included auto parts producers (up 79.2%), houseware makers (up 79.1%) and paper bag and box firms (up 67.3%).

* Meanwhile, the loser’s list also was peppered with cyclical groups, including computer companies (down 12.9% for the year, hurt by IBM’s crash), auto makers (down 8%) and coal miners (off 3.8%).

* More confusing was the checkered performance of groups that generally haven’t been subject to cyclical swings in the economy--the so-called stable-growth businesses. Many proved not so stable.

For example, hospital management was the fourth-worst performer of 87 industry groups tracked by Standard & Poor’s Corp. last year, as the average stock in the group fell 15.5%. Other surprise laggards included telephone utilities (up just 0.7%) and grocery chains (up 1.6%).

* The biggest losers of 1991 were energy-related industries, which plunged after soaring in 1990 on speculation that the then-impending Persian Gulf conflict would permanently raise oil and natural gas prices.

* The year’s best group: toy makers, which surged 126.7%, led by sensational gains in shares of Mattel and Hasbro. Second were shoemakers, up 108.2%; Nike and Reebok scored huge sales growth.

Which at least goes to show that, in an uncertain economy, most people still knew how to have fun.

Best and Worst Stock Groups of ’91

Here are the 15 best-performing and 15 worst-performing stock groups by industry in 1991, based on 87 industries tracked by Standard & Poor’s Corp. The average stock in the S&P; 500 index rose 26.3% in 1991 after falling 6.6% in 1990. Returns listed here are through Monday’s close and don’t include dividends.

Best of ’91

Average stock percent change: Industry group 1991 1990 Toy makers +126.7% -12.6% Shoemakers +108.2% -0.2% Apparel retailers +103.3% +4.3% Home builders +90.1% -19.5% Auto parts +79.2% -29.6% Housewares +79.1% +1.7% Major regional banks +72.4% -32.6% General mdse. retailers +71.7% -0.5% Electronic instruments +69.6% -29.3% Health care (misc.) +68.6% +61.6% Paper bag/box makers +67.3% -24.5% Drugs +62.4% +11.3% Medical products/supplies +60.7% +15.2% Apparel makers +58.1% -14.9% Soft drinks +57.4% +21.2%

Worst of ’91

Average stock percent change: Industry group 1991 1990 Oil/gas drilling -41.7% -12.3% Gold mining -25.2% -12.9% Natural gas -17.9% -16.4% Hospital management -15.5% -1.8% Computer systems -12.9% +8.5% Domestic oil firms -12.3% -8.9% Auto makers -8.0% -28.0% Oil well equip./services -5.3% +9.4% Coal mining -3.8% -9.2% Insurance brokers +0.7% -3.7% Telephone utilities +0.7% -9.3% Grocery stores +1.6% +3.7% Aluminum +4.2% -14.0% Conglomerates +4.4% -19.3% Commercial services +4.6% -18.5%

Source: Smith Barney, Harris Upham & Co., based on S&P; indexes.