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Most Mich. stocks may end ’09 higher

December 30, 2009

Most Mich. stocks may end ’09 higher

Valassis looks to be state’s biggest winner at $18.47 a share, a 1,229% increase for the year

Detroit News Finance Editor

As the year winds to a close, investors in Michigan-based companies will hope that 2009 is a sign of things to come: Despite starting the year in recession and riding through one of stock market’s biggest crashes in March, shares in the majority of large, publicly traded firms headquartered in the state head toward New Year’s Eve showing gains.

Of 73 Michigan stocks tracked by investment management firm Loomis, Sayles & Co. L.P. of Bloomfield Hills, 53 showed some sort of gain for the year; 40 of those matched or beat the Standard & Poor’s index of 500 stocks.

"I can certainly find disappointments on the list," said David Sowerby, portfolio manager of Loomis, Sayles, "but the average Michigan stock was up quite well in 2009 — particularly when you remember how ugly the market looked on March 9."

The biggest disappointment among Michigan stocks doesn’t even show up on the list: the near wipeout of shares of General Motors Corp., after the biggest of Detroit’s Big 3 was steered through a government-backed bankruptcy reorganization.

Shares of the old GM were delisted in bankruptcy and now are virtually worthless, despite finishing 2008 at $3.20. The stock trades over-the-counter as "Motors Liquidation" at about 50 cents a share, a purely speculative play by bottom-fishers hoping to gain something from sales of old GM’s cast-off assets.

Shares in the newly reorganized General Motors Co. could come next year, at the earliest.

In contrast, the biggest gainer among Michigan stocks started the year well below GM’s $3.20 share price. Shares of Livonia-based Valassis Communications Inc. ended 2008 at $1.32. The publisher of coupons, newspaper inserts and shopping fliers was fighting doubts about a recent acquisition, high levels of debt, worries about consumer spending and a lawsuit filed against its largest competitor. Monday, Valassis stock closed at $18.47 a share — a gain of 1,229 percent for the year.

"Obviously, 2009 was a year when earnings at most companies were declining, and ours will probably be up $45 million versus 2008," Valassis CEO Al Schultz said Tuesday.

During the year, the company pared its debt, finished integrating its acquisition of ADVO Inc., won a $300 million unfair competition suit against News America, launched the Red Plum mail distribution line and expanded the online operations it launched in late 2008.

"When you roll all those things together, it turns out to be a pretty good year," said Schultz, who collected more than $8 million in November when he exercised options on 550,000 shares of Valassis stock at $1.32 and sold them for $16.14 to $17.89 a share.

Other big winners in Michigan stocks included Ford Motor Co. and several auto-related firms, as well as bookseller Borders Group, furniture-maker La-Z-Boy and auto finance company Credit Acceptance Corp.

The biggest drops among Michigan stocks were concentrated among financial firms and health or technical companies. The biggest loss came on shares of Citizens First Bancorp Inc. of Port Huron, which operates the 24-branch Citizens First Savings Bank. Shares of the savings-and-loan holding company closed 2008 at $2.10 per share, but ended Monday at 42 cents, turning in a decline of 80 percent for the year.

The winners and losers reflect the comeback in growth for consumer-cyclical stocks, said Sowerby, while the financial sector continues to struggle under a cloud of concerns about loan losses, foreclosures and other worries.

Sowerby cautions against reading even the impressive gains among the top-performers as "buy" indications. He notes that the economic recovery will continue to be modest next year, and that many stocks are up only because they were beaten so far down at the official height of the recession.

"There’s still enough doubt in the economy that 2010 remains highly uncertain," Sowerby said. "It’s that these stocks were prices for death."

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