Continued: Several signs of life sprout in the Bottom 50

Buffalo Wild Wings, the seemingly indefatigable casual-dining outfit, and heart valve maker ATS Medical led a short list of only six public companies among the Star Tribune 100 that increased market value in the 12 months ended March 31. ATS jumped 103 percent, while Wings soared 46 percent in value.

No. 3? Multiband Corp., whose market value rose 8 percent over the same period.

Multi what? The New Hope-based company known as Vicom until 2004 last year figured out a way to make a buck off couch potatoes and thrifty types who would rather sit home and enjoy satellite-fed TV programs than go out for a night on the town.

Let's see, chicken wings, satellite TV and heart valves. We're not sure there's a connection. But in this recessionary economy, it's good to see some positive performers. Indeed, five of the six market-value gainers on the Star Tribune 100 came from the bottom half of the list.

Sales at the Bottom 50 rose 6.5 percent in 2008, slightly faster than the ST100 overall sales growth of 5.9 percent. Profit for the group dropped 58 percent, to $108 million. Meanwhile, market value fell 25 percent to $9.4 billion. (This analysis excludes medical products maker EV3, which reported an unusually large noncash impairment charge.)

Multiband, which joins our list at No. 90, has -- through several strategic acquisitions -- become one of the nation's biggest installers used by DirecTV, as well as cable TV, television and Internet services, to homes and multiple-dwelling buildings in several states.

"We will tell our story to anyone who asks," said CEO Jim Mandel, an 11-year veteran who also has worked as an operations boss in the wireless and casino industries. "I pick up my phone when it rings. We don't have a formalized approach yet to investor relations. We're running the entity and refining our business. If we execute properly, people will take notice."

Multiband has no analyst coverage. However, something is working. The company has achieved profitability and the stock has achieved trading volume. Multiband, which also boasts an expanding roster of nearly 4,000 employees, earned $945,000, or 10 cents per share, from continuing operations, compared with a big loss in 2007. Revenue, boosted by acquisitions, rose by 185 percent to $43 million.

Management is boldly projecting revenue of more than $200 million this year. Thanks to booming DirecTV business, a January acquisition and the integration of compatible business, Mandel said recently that Multiband can "organically grow high-margin revenue without a corresponding increase in operating expenses." If he's right, that bodes well for profitable growth.

Rochester Medical Corp, which posted lower profit in 2008, nevertheless had a 7 percent increase in market value. Vascular Solutions' market cap rose less than 1 percent, but sales jumped nearly 16 percent and profit soared nearly 200 percent. It makes medical devices to treat vascular disease.

Several other Bottom 50 companies had breakout revenue years in 2008. But their stocks have yet to respond in a market where the major indexes were down by 30 to 40 percent.

They include Xata Corp., the restructured truck-logistics company that is helping truckers save precious fuel and money, and Health Fitness Corp., the wellness program and corporate fitness center manager. Health Fitness has consolidated a big acquisition and won some key contracts recently, in addition to posting strong profitability in 2008. Health Fitness dropped in value by 50 percent during the four quarters ended in March.

Clint Morrison, a veteran small-company analyst at Feltl and Co., put a "buy" recommendation on "FIT" on March 5 at $1.60 per share. Several days later, the stock started north and has traded around $3 per share lately on estimates that FIT will earn 26 cents per share this year and grow 15 percent annually.

"They just announced a piece of business with the state of Nebraska, which is doing a statewide program," Morrison said. "They are executing. The market is starting to recognize they are real. My theme is that you cannot own a better 'pure play' in the wellness business. It's a hot space."

The wellness business is hot because it's cheaper to invest in diet-and-fitness programs than pay to treat heart disease, diabetes and smoking-related cancer.

Morrison also likes Xata, another company that is performing well but not tooting its own horn too much. The stock has run from $1.75 to about $2.50 since January.

Small caps to the rescue?

Traditionally, small stocks lead in an economic recovery. And since the market low of March 9, the Russell 2000 index of small-capitalization companies is up about 37 percent compared with 28 percent for the Standard & Poor's 500 index of large stocks.

"Going forward, typically, small caps will lead when you move from recession to recovery and we are seeing that in the stock marketplace," said David Chalupnik, head of equities at the asset-management unit of U.S. Bancorp. "That may continue for a while. The small caps are much more leveraged to the U.S. economy. The problem is small-cap stocks right now are highly valued compared to large caps.''

Overall, Chalupnik says stocks are priced high relative to expected earnings this year.

But if you believe the economy is starting to come out of its slump, you need to be in the stock market, at least with long-term retirement money. Investor sentiment has turned positive after 17 months of bearishness.

"The economy is improving and the Obama administration's economic policy and the Federal Reserve's monetary policy is being framed in a positive way," Chalupnik said. "Earnings are struggling but they will improve. We've positioned our equity portfolios a little more aggressively."

Neal St. Anthony • nstanthony@startribune.com