Neal St. Anthony: Mosaic stock sees a sharp growth spurt

Remember the 1990s tech boom? Well, if 2007 is remembered for anything besides the subprime debt meltdown, perhaps it will be the fertilizer boom.

Among Minnesota's biggest public companies, shares of global fertilizer giant Mosaic jumped 342 percent in 2007 to lead the Bloomberg Star Tribune 100 index as well as the national rankings of all large-cap stocks.

The Cargill-controlled company has exploded from $15 per share at its 2004 initial public offering to $94.34 on Dec. 31. And while most of the market tanked in post-New Year's trading last week, Mosaic added another buck to its stock price, closing Friday at $95.41.

Mosaic owes its success to the worldwide boom in agricultural commodities and to government-subsidized alternative fuels programs including ethanol and biodiesel that have boosted corn and soybean plantings to record levels. Mosaic, which reports first-half fiscal 2008 earnings this week, is worth a whopping $43 billion today.

Boosted by Mosaic and several pending acquisitions, the Bloomberg Star Tribune 100 index of Minnesota's largest public companies rose 5.3 percent in 2007, outperforming the larger Standard & Poor's 500 index (up 3.5 percent) and the Russell 2000 small-company index, which fell 2.7 percent.

A venerable but tiny company, 30-year-old Appliance Recycling Centers of America, took second place with a 316 percent return to shareholders. St. Louis Park-based ARCI, which is worth $43 million, hauls away and recycles appliances, and it sells dented-and-scratched appliances through a growing network of 15 Appliance Smart stores.

Rural Cellular of Alexandria, Minn., was up 235 percent, thanks to its acquisition by Verizon for $45 per share, or $757 million.

MGI Pharma (up 120 percent) is another company that is about to be acquired by a larger competitor.

Meanwhile, Capella Education, Minnesota's leader in the online education business, rose 170 percent in value last year.

IntriCon (151 percent), Synovis Life (96 percent), SurModics (74 percent) and Medtox Scientific (36 percent) are small to midsize medical technology firms that were strong rebounders in 2007.

Other winners included manufacturing firms Donaldson (34 percent), Ecolab (13 percent), Toro (17 percent), Fastenal (13 percent) and 3M (8 percent). Each, except 3M, has returned at least 10 percent to shareholders in each of the last three years.

Shares of transportation logistics firm C.H. Robinson Worldwide jumped 32 percent in 2007; the company's annualized three-year return to shareholders is 26 percent.

UnitedHealth Group, the big health insurance consolidator, has come back to earth amid boardroom scandals, accounting restatements and the revelation that it was underinvesting in the technology to keep straight critical client billing. UNH was up 8 percent last year and returned 9 percent over the past three years.

The losers

The big losers included Target (-12 percent), Famous Dave's (-18 percent), Buffalo Wild Wings (-13 percent), Regis (-29 percent), Christopher & Banks (-39 percent) and ValueVision Media (-52 percent). The problems range from management upheavals to Wall Street concerns that indebted consumers will put their credit cards away for awhile.

The worst sector was financial services, beset by the subprime mortgage implosion brought on Wall Street bankers that can always be counted on to turn dynamic trends into horrific excesses. (Remember the junk-bond collapses of the 1980s, followed by the savings and loan disaster and the Asian currency crisis?)

The damaged goods include U.S. Bancorp (-12 percent), HMN Financial (-29 percent) Piper Jaffray (-29 percent), TCF Financial (-35 percent) and MoneyGram International (-51 percent).

Time to buy a sick puppy?

But just because a stock is down for a year or two doesn't mean that it won't revive.

Ben Crabtree, a veteran bank analyst who works for St. Louis-based Stifel Nicolaus in Minneapolis, said his universe of 23 small to midsize depositories is down about 30 percent in value in 2007, even though most of them have little or no exposure to some Wall Street-engineered investment vehicles known as securitized subprime loans, "CMOs" and "SIVs."

And I thought a "SIV" was an incompetent goalie.

Most of the banking industry's problems are contained in the country's 10 largest banks.

Crabtree said battered Associated Bancorp of Green Bay and TCF Financial of Wayzata represent good value for folks willing to buy and hold for at least 18 months. He lists them officially as "holds."

Take TCF, also subject of takeover speculation by Bank of Montreal through its Chicago-based Harris Bank, or perhaps another suitor. Besides, TCF throws off a cash dividend of nearly 5.5 percent at today's stock price.

If you believe consumer spending power has been weakened by their inability to take more money out of home equity, then "there's no need to be in a hurry to buy these stocks," Crabtree said, because that weakness could filter through to auto loans and employment.

"If you're willing to look out 18 months, and realize that these banks' stocks are back to where they were trading in 2002 and paying a 5 percent yield, ... for patient investors, it may be a time to buy," Crabtree said.

Mark Smith, a restaurant analyst at Feltl & Co., notes that Famous Dave's shares declined 18 percent due to weakness in the restaurant trade and the departure of CEO David Goronkin. With the stock trading near a 52-week low of around $13, that's about 14 times projected 2008 earnings -- well below that the historical trend of DAVE trading at 18 to 25 times forward earnings.

Clint Morrison, the research director at Feltl, recommends software developer Ciprico and in-store digital signage company Wireless Ronin to investors comfortable with risk. These small companies have retooled and are adding profitable customers.

A few final thoughts

• Bullish analysts project that Xcel Energy, which faces a couple of big rate cases and is building a reputation as a green utility for its long-term wind and conservation programs, could be up by 10 percent or so within a year. And Xcel pays a 4 percent stock dividend.

• U.S. Bancorp, which pays a 5 percent dividend and trades around $30 per share, should be worth $34 within 12 months, according to the consensus of 17 analysts surveyed by Thomson Financial.

• ASV of Grand Rapids, which makes rubber-tracked loaders, is trading near a 40-month low of about $13 per share. The analyst consensus is that this stock, based on earnings growth, should be worth nearly $15 within a year.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com