Thursday, January 20, 2011


Despite turmoil and change, Richmond-based brokerages say they are confident that stock investments will see a resurgence in the 1990s, and that the recent shakeout among investment firms will only strengthen the industry.
Stockbrokers are confident by nature, but their predictions at the end of 1989 seemingly are much cheerier than the ones they've been making in the past two years.
That's probably because the 1980s -- a decade marked by disappointments and upheaval in a business already known for its ups and downs -- are ending.
For starters, Black Monday -- Oct. 18, 1987 -- caused brokerages to pare staffs and threw a scare into individual investors worried about the safety of their nest eggs.
The one-day plunge of 508 points spurred an unprecedented wave of consolidations as the smaller, more vulnerable firms looked to the big players for security and capital reserves.
Even the nation's largest brokerages saw advantages in merging. In the largest acquisition in investment banking history, Shearson Lehman Bros. of New York bought E.F. Hutton & Co. for $1 billion in December 1987. The combined company, Shearson Lehman Hutton Inc., has a downtown Richmond office.
More recently, Richmond-based Scott & Stringfellow Financial Inc. acquired Investment Corporation of Virginia in Norfolk for about $2 million. The combination created a 400-employee firm, Scott Stringfellow Investment Corp.
In some senses, the weakening in the industry that took place in the late 1980s created opportunities which had never existed before, said Walter R.
Anderson, retail manager for Scott & Stringfellow.
The competition is actually shrinking, he said, as some of the weak firms drop out and even more undergo mergers to stay alive.
"You've seen a contraction in the industry," Anderson said. In 1989, there were about 250 fewer brokerage firms than in the previous year, he said.
"We look on this environment as an opportunity to grow."
With the completion of the merger, Scott & Stringfellow has 22 offices in Virginia and North Carolina. "We want to continue to become better known in North Carolina," Anderson said. "We only been there two years."
And the firm's expansion plans aren't confined to Virginia and North Carolina.
"We're not out aggressively looking for new territories . . . but we'll consider it if its a good fit for Scott & Stringfellow," he said.
Profits at the firm are up about 40 percent this year, making a significant leap from 1988s lagging levels. The company's third quarter was an example of this year's performance.
As of Sept. 30, the regional brokerage reported net income for the quarter at $379,601, up from $271,523, and profit per share increased to 21 cents from 15 cents. Scott & Stringfellow's gross revenue for the quarter rose 14 percent to $7.6 million from $6.7 million.
"We had a terrific end of the year, so (the percentage increase for 1989) won't be any less than that," Anderson said.
Other local brokerages reported similar results.
Charles A. Mills, vice president of Anderson & Strudwick Inc., said, "We had a very good year. Revenues were up 30 percent, even though we had 10 percent fewer people."
After the crash in 1987, brokerages across the county trimmed their sales staffs by about 10 percent. Most firms, like Anderson & Strudwick, haven't yet replaced those employees.
This year, Mills said, his firm was able to make up for some of the losses suffered in 1988. "People are slowly, nonetheless deliberately, beginning to buy stocks again," he said.

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