Companies that can take a punch

  • Article by: NEAL ST. ANTHONY and JOHN J. OSLUND , Star Tribune
  • Updated: September 1, 2002 - 11:00 PM

Terrorist attacks, war, recession, scandal -- the past 12 months have seen it all.

Throw in the slippery residue from the burst of the telecom/dot-com bubble, and the investor landscape looks as desolate as an Afghan mountainside.

As nearly everyone who has a 401(k) plan knows, the major indexes are down in double digits. Since Sept. 4, a week before the Sept. 11 attacks, the Standard & Poor's 500 index has fallen 19.1 percent. The tech-heavy Nasdaq composite index has lost 25.7 percent.

But Minnesota's largest companies have fared well by comparison. Among our Star Tribune 100 list of Minnesota's largest public companies (ranked by revenue), 38 have gained or held ground while 57 are down. Nearly two-thirds of the Minnesota companies are outperforming the Standard & Poor's 500 index.

A year after the World Trade Center attacks, the Bloomberg/Star Tribune 100 has lost 10.4 percent. Although the losers outnumber the winners, the past year has certainly demonstrated that Minnesota's corporate heavyweights can take a punch.

"We have a mix of industries such as medical products and services, food, specialty retailing and capital equipment that smoothed out the economic swings and associated changes in share prices," said Dianne Orbison, president of Advantus Capital in St. Paul. "These companies provide valued products that consumers want even as times get tougher."

You might not need to upgrade your PC or buy a new cell phone, but you can't wait too long for that St. Jude Medical (up 7.4 percent) heart valve, or to paint your house with Valspar (9.6) coatings or order checks from Deluxe Corp. (36.7) so you can bank seven days a week at TCF (7.2).

"Many of these local companies have been overlooked until the last year as the market was focused more on the high-growth technology and telecommunications sectors of the market," Orbison said. "That left behind many well-run and more steadily growing companies that are prevalent in our local economy."

Mark Thompson, the chief stock picker at Minneapolis investment management firm Riverbridge Partners, tips his hat to Peter Frechette as one reason why Riverbridge's flagship stock portfolio returned 18 percent to shareholders in 2001 and continues to outpace the sagging major stock market indexes in 2002.

Frechette is the chief executive of usually unheralded Patterson Dental Co. of Mendota Heights, whose shares have gained 36.5 percent since Sept. 4. Frechette & Co. do know how to grow, take market share and make money in a way that has tripled the stock price in the past five years.

"It's not the cheapest stock around anymore," Thompson said. "But I'm not selling it. It's a steady performer. It may go down some. But it will be good to own for another five years."

Patterson also is a pretty good proxy for the drivers among the Bloomberg/Star Tribune 100 index of Minnesota's largest companies. 3M Co., the diversified global manufacturer (which has a large dental products group, by the way) is up 19.2 percent.

More than a third of the Minnesota companies are up since September 2001 -- a month that began with hopes for an economic rebound and ended amid the horror of the terrorist attacks on New York City and Washington, D.C., and a market decline that only recently bottomed.

Some winners, such as Select Comfort, Sportsman's Guide and Digital River, are rebounding from precipitous declines in 2000 and 2001. And Alliant Techsystems, up 46.1 percent compared with last year, is a munitions maker for the Pentagon that has benefitted from the war on terrorism.

Beyond that, the Minnesota gainers are paced by stalwart, not sexy, companies with solid businesses and managements.

"Fastenal, Bemis, Graco, Valspar, Ecolab," said Tom Mahowald, equity research director at American Express Financial Advisors. "These are stable companies with disciplined models and an industrial flair to most of them. There's an expectation as the economy strengthens they will be among the first to benefit. They are also staples: clothing, machinery, specialty chemicals."

The losers

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