Saturday, January 1, 2011

Elbert: Iowa firms beat big indexes in '10 - DesMoinesRegister.com

Shares of publicly traded Iowa companies benefited in 2010 from the strong farm economy, the recovering commercial real estate market, low mortgage rates and a failed hostile takeover of Casey's General Stores.

After the stock market had closed Friday for good on 2010, 12 of Iowa's 19 largest publicly traded companies had double-digit gains for the year and one had triple-digit gains.

Farm equipment maker Art's Way Manufacturing in Armstrong posted the triple-digit gain, 176 percent, driven in part by increased sales and profits from acquisitions the company had made in recent years. The company's shares closed Friday at $11.72, a 28-month high.

The share prices of two thinly traded Iowa companies produced double-digit losses.

Shares of Meta Financial Group of Storm Lake were down 34 percent for the year after it disclosed in October that government regulators had ended its lucrative payday and tax-refund lending, citing unfair and deceptive trade practices.

Shares of newspaper publisher Lee Enterprises of Davenport fell 29 percent in 2010, after having mounted a comeback in 2009 that saw its share price increase from 41 cents to $3.47.

In 2010, investors remained uncertain about the future of newspapers and other media companies in the new digital age, and Lee shares trended downward much of the year. They hit a high of $4.49 in mid-January and closed the year at $2.46.

An overview by segment of how Iowa's publicly traded companies performed in 2010.

Insurance: Compared with other segments, Iowa's five publicly traded insurance companies turned in the best 2010 performance, gaining an average of 37 percent, compared with a 2 percent gain in 2009.

Gains by Iowa's life insurance companies outpaced those of property-casualty insurers in 2010, but that was largely because the life insurers were hit harder in 2008 and 2009.

One major concern investors had about insurance companies in 2009 was commercial real estate, because sizable portions of insurers' investment portfolios involved either ownership of or mortgages on office buildings, shopping centers and warehouses.

As 2010 progressed, commercial real estate loan delinquencies stabilized and many owners were able to refinance at lower rates, thereby removing a lot of the uncertainty for the large insurers and other commercial real estate lenders.

Also, as the government pumped more money into the economy, the values of all assets, including stocks and commercial real estate, began to rise, removing fears about the long-term survival of insurers.

Investors concerns were reflected in the shares of Principal Financial Group, which hit a low of near $6 in March 2009, before rebounding to around $24 at the end of 2009. In 2010, shares rose and fell several times, hitting a peak of $33.32 on Dec. 22 and ending the year at $32.56.

Banking: The state's five largest publicly traded banks had an average increase of 22 percent. In 2009, their share prices lost an average of 29 percent.

The gains by bank stocks is typical of what happens when investors believe the economy is coming out of recession, said Charles Funk, chief executive of MidWestOne Financial of Iowa City. Studies have shown that bank stocks often rise several months before more tangible evidence of recovery is visible, he said.

Strong share-price gains by three Iowa banks were well above industry averages. Some of that could be a reflection of the economies in the communities where the banks are located, Dubuque, Iowa City, and West Des Moines, but some of it could also be due to special circumstances.

Funk said MidWestOne's 73 percent gain was probably tied in part to the 2008 merger that brought together banks in Oskaloosa and Iowa City.

“In our case, investors were still absorbing the merger” when the downturn began, creating uncertainty about how well it would play out, he said. But with earnings up this year, “we’ve done a pretty good job of showing progress” and convincing investors that the merger was a good deal, Funk said.

Plus, he said, “we were handed a huge gift in the last four or five months of the year when mortgage rates fell.”

That allowed Iowa banks “to refinance a bunch of single family real estate loans,” producing a bonus of fee income that would not normally be there, Funk said.

Manufacturing:

Flexsteel Industries of Dubuque also had a strong year, with its 2010 shares gaining 73 percent. The company makes wood and upholstered furniture for homes, offices and recreational vehicles.

In 2010, Flexsteel benefited from tough decisions its managers made in 2008 to bring down costs by closing two plants and cutting employment by nearly 30 percent. With lower costs and moderate increases in sales in 2010, Flexsteel’s profits soared. Flexsteel shares began the year at $10.23, and ended at $17.68.

Iowa’s largest publicly traded manufacturer, Rockwell Collins in Cedar Rapids, had an up and down year.

The avionics manufacturer began the year as the state’s most valuable publicly traded company with a market value — number of shares times share price — of $8.7 billion.

Rockwell Collins had captured that title from Principal Financial Group during the 2008 market meltdown. At the end of 2009, Principal Financial’s market value was a billion dollars less than Rockwell Collins.

By the end of 2010, Principal Financial had recaptured the top spot with a value of $10.4 billion, compared with $9.1 billion for Rockwell Collins. Principal Financial shares gained 35percent during the year, compared with a 5percent gain by Rockwell Collins.

Retail: Iowa's only publicly traded retail company, Casey's General Stores, spent several months fighting off an unfriendly takeover bid by Alimentation Couche-Tard, the Canadian company that owns Circle K and other convenience store chains.

Casey's shares were trading below $32 when Couche-Tard made an initial offer of $36 in April. Later, the Japanese owners of 7-Eleven stores bid $40 and $43.

All offers were rejected by Casey's board. The convenience store company ended the year with a 33 percent jump in value, closing Friday at $42.51.

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