Monday, December 27, 2010

D.A. Davidson: Northwest stock winners and losers

Note from Julia: For those of us working every day to manage our investments, tracking trends and checking out lists of stock winners and losers is part of the game. This week we looked at a roster of 113 publicly traded companies based in four Pacific Northwest states. Here's what we found from a report produced by Fred Dickson, chief investment strategist at D.A. Davidson investment financial services company.
If mining companies, heavy equipment manufacturers and certain consumer businesses such as Jones Soda Co. are among regional stock price winners in 2010, it is easy to determine the losers...banking businesses.
According to an analysis of 113 publicly traded companies in the Northwest states of Washington, Oregon, Idaho and Montana by D.A. Davidson & Co., banks with lingering bad loans, low earnings and disappointed investors turned in the worst stock performances of 2010.
Winners in terms of improving revenue, solid earnings and rising stock share prices were spread across a diverse collection of businesses from beer makers and airline operators to computer chip businesses and clothing manufacturers and retailers.
Fred Dickson, chief investment strategist at D.A. Davidson, a regional financial services business, said however that while some Northwest companies enjoyed strong financial performance in the past year, they remain cautious about adding workers as they head into 2011.
"My best guess is that many companies are in position to consider adding employees but will refrain from making significant employment additions until they get more details on health care costs associated with the 2010 Health Care Reform Act," Dickson said.
While some employment growth is expected in 2011, it likely will not make much of a dent in the unemployment rates in either Washington or Oregon where nearly 10 percent of the work force has been out of a job for more than a year. In the Portland-Vancouver metro area, for example, some 120,000 people are unemployed and looking for a job. Clark County's jobless rate is near 13 percent with 26,000 out of work.
Northwest perspective
Despite high unemployment and mixed consumer confidence, publicly traded companies in the Northwest generally enjoyed a year of growth, improving sales and better profits in 2010, the Davidson report showed.
Of the 113 companies tracked by the firm, more than half (64 percent) saw an increase in their stock share price. The average stock price increase for the group was 26 percent as compared with the S&P 500 stock price performance, up 11 percent in 2010.
Among top performers were Bellevue, Wash.-based B-Square Corp., a software and engineering services firm. The company's share price jumped 253.6 percent year-to-date through Dec. 22. Portland-based Craft Brewers Alliance, which makes Red Hook and Widmer Brothers beer, saw its share price increase 205 percent.
Others enjoyed share price recovery from prior dramatic sell-offs. Among those were Seattle-based online technology company, F5 Networks, up 161 percent in 2010 and Seattle-based Jones Soda, up 142 percent. Jones is famous for its off-beat concoctions including pop that tastes like gravy.
Other growing companies of local note were Columbia Sportswear Co. with a share price increase of 59 percent.
- Lithia Motors, up 72 percent.
- Greenbrier Cos., up 101 percent.
- Alaska Air Group, up 66 percent
- Nike Inc., up 31 percent
- McCormick & Schmick's Seafood Restaurants, up 28 percent.
Despite the general industry malaise, some banks bucked the trend with share price improvement as their balance sheets began to look more attractive. Among them were West Coast Bancorp (Oregon), up 26 percent, Columbia Banking system Inc., up 32 percent and Riverview Bancorp Inc., in Vancouver, Wash., up 5.7 percent.
Regional banking losers include Everett-based Cascade Financial, down 81 percent, Medford, Ore.-based Premierwest Bancorp, down 77 percent, Walla Walls's Banner Corp., down 26.1 percent and Spokane-based Sterling Financial Corp, down 56 percent.
Also taking a hit were Seattle's Oniva Inc., an online service provider, and Tualatin, Ore.-based Bioject, which makes needle-free injection devices, down 44 percent.
The best-performing regional stocks share a few common traits, Dickson said. Among those were a "significant fundamental performance turnaround in 2010 or continuation of solid revenue and earnings growth."
2011 outlook
While many companies expect to see continuing improvement in sales and profits in 2011, they've held back on adding workers until they see more recovery. And there are new worries on the horizon, Dickson said.
- Will the recovery continue and at what pace. Will consumers become more confident and will businesses expand?
- How much will the new Health Care Reform Bill affect costs? Added costs will clearly impede hiring.
- How will retailers adjust to rising product prices from China where inflation is heating up? And how will any price increases affect consumer spending in the U.S.?
"Given the recent enactment of the Tax Reform Act, industrial, technology and industrial material companies operating in the region should benefit from the tax break extensions including the opportunity to claim full depreciation on 2011 capital expenditures," said Dickson.
Consumer spending is expected to continue to expand at a 3- to 4-percent rate.
Companies holding record levels of cash have a "terrific incentive to invest in new technology and productivity solutions or simply expand their businesses," he said. "Such investments might temporarily hurt 2011 earnings because of higher depreciation charges, it should stimulate producers of industrial equipment to expand businesses to meet pent-up deferred demand."
While 2010 was a year of recovery for many companies in the Northwest many businesses will continue to see good growth, especially those tied to consumer products and consumer spending. Unfortunately, the job outlook remains weak through much of 2011 and many companies especially those in financial services, will continue to work their way out of of the 2007-2009 recession. Some banks, Dickson said, may not make it.
The good news is that many Pacific Northwest companies heavily weighted to small- and mid-cap categories dramatically outperformed major stock markets in 2010 and are positioned to see further revenue and earnings growth in the coming 12 months.

Northwest Stock Price Winners
BSquare Corp., software, 253.6 percent
Craft Brewers Alliance, Inc., beer maker, 205 percent
F5 Networks, Inc., online network support services, 161.3 percent
Jones Soda Co., beverage maker, 142.5 percent
Stillwater Mining Co., mining, 135.1 percent
Zumiez Inc., teen clothing retailer, 125.1 percent
Lattice Semiconductor Corp., computer chips, 115.6 percent
Coinstar Inc., automated video dispenser maker, 111.8 percent
Greenbrier Cos., rail car manufacturer, 101.5 percent
TriQuint Semiconductor Inc., computer chipmaker, 89.6 percent.

Northwest Stock Price Losers
Cascade Financial Corp., banking, -80.5 percent
PremierWest Bancorp, banking, -77.1 percent
Sterling Financial Corp. (Wash.), banking, -55.7 percent
Onvia Inc., online services, -46.1 percent
Bioject Medical Technologies, needle-free injection therapies, - 44.4 percent
Microvision Inc., miniature display technology, -39.7 percent
Coldwater Creek Inc., women's clothing retailer, -34.7 percent Inc., online drug seller, -32.2 percent
SCOLR Pharma Inc., specialty drugs, -29.4 percent
Planar Systems Inc., display technology, -26.2 percent.
SOURCE: D.A. Davidson & Co., Portland, Ore. YTD performances, as of Dec. 22, 2010.

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