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Buffalo-area stocks took a bit of a breather to start the year.

Coming off a searing 40 percent gain in 1997, the stocks of the locally based companies turned in a solid performance during the first three months of this year. But the local stocks lagged far behind the major market indexes for just the second time in the last six quarters.

An investor who owned a single share of each of the local stocks would have seen the value of those shares rise by 6.4 percent during the first quarter, which puts the Buffalo Portfolio on a pace for its fourth straight year of gains exceeding 20 percent. Still, the local stocks will have to pick up the pace to keep up with the gains of 40 percent, 38.8 percent and 29.1 percent they have produced during the last three years.

And the solid gain by the local stocks during the first quarter couldn't come close to keeping pace with the torrid start to the year by the major market indexes. The Dow Jones Industrial Average gained 11.3 percent, while the Standard & Poor's 500 index rose 13.5 percent. The technology-laden Nasdaq composite index was even hotter, rising 16.9 percent in just three months.

As proof that a company's fortunes can change swiftly on Wall Street, the three top local stocks during the first quarter were among last year's weakest. The shares of
Rand Capital Corp. and Acme Electric Corp. bounced back strongly on improving earnings news and, in Rand's case, heavy buying by company insiders. Integrated Waste Services Inc. shares also rose sharply on a percentage basis, but that gain is deceiving because the stock finished last year at a penny and has since bounced back to be worth a dime.

Overall, it was a decent quarter for most of the local stocks. Almost 71 percent of the 24 local issues managed to rise during the first three months of the year, and a third were able to post double-digit gains. But just eight of the local stocks were able to fare better than the Dow.

Leading the way was Rand, the Buffalo venture capital firm that was one of the area's highest-flyers for a brief period in the early 1990s before crashing when its big investment in a wireless data transmission firm flopped. Rand was the Buffalo area's second-worst local stock in 1997, losing 34.8 percent of its value.

But recently, Rand has been slowly coming back. It has a new management team in place and a new investment strategy. As a result, the value of its portfolio has increased during two of the last three quarters, including a 3 percent gain during the final three months of last year. And its stock soared by 26.7 percent during the first quarter.

Rand's officers and directors also have been putting their money behind the company, buying almost 120,000 shares in December alone. That heavy insider buying caught the attention of The Insiders investment newsletter, which featured the company in a January issue and described Rand as a deeply discounted, though speculative, investment.

Strong earnings, which beat analyst expectations, also helped propel Moog Inc.'s stock to a 20.6 percent gain, and second place among the local companies.

Booming sales of motion-control products, coupled with nearly flat expenses, helped the Elma aerospace company boost its earnings by 32 percent during the final three months of last year. Moog's fast-rising earnings caught the eye of brokerage firm Cowen & Co., which started following Moog's stock and issued a "strong buy" recommendation on the shares.

Another big turnaround came from Acme Electric, the East Aurora electronics manufacturer that had the third-worst performance among the Buffalo Portfolio last year, with its 27.8 percent loss.

Like Rand, Acme's stock reacted to the turnaround in the company's earnings, rising by 19.2 percent. A shift away from some less profitable work helped Acme boost its earnings during the final three months of last year, despite a 3 percent drop in sales.

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