Some local stocks scored big this year

THE MINNESOTA INVESTOR

GENE WALDEN

Are you feeling rich yet? It's been a wild ride for stock market investors this year, with the market plunging to a 12-year low in March before roaring back this summer with a 45 percent gain.

The rally has certainly helped investors recoup a significant share of their losses, but stocks are still down more than 30 percent from their high in October 2007.

However, if you were fortunate enough to have invested in the right stocks at the right time, you could have made some extraordinary gains this year. At least a dozen local stocks have more than doubled in price, including a handful that are up more than 200 percent. (Of course, investing in stocks that have fallen to $1 or less, as some of these stocks did, is an extremely risky proposition -- even though big risks can have big payoffs.)

The biggest winner this year is Select Comfort (SCSS), the manufacturer of "Sleep Number" mattresses. The stock is up about 15-fold since March after dropping steadily from its high of about $17.50 in 2007 to a low of just 19 cents in March. It closed Friday at $3.05 -- up almost sixteenfold from its low.

Depressed sales of its mattresses led to Select Comfort's precipitous fall. Operating income dropped from $72.8 million in 2006 to $43.5 million in 2007 to a loss of $69.5 million in 2008. But in the past two quarters, the company has reported operating income of $1.2 million. The stock remains volatile, climbing to a 52-week high of $3.50 a share on Aug. 28 before retreating over the next few days.

ValueVision Media (VVTV), which operates the television shopping network ShopNBC, has also been a roaring success this year after surviving a death-defying plunge. After trading at over $8 a share two years ago, the stock dropped to just 18 cents a share in March. Since then, it has climbed more than seventeenfold to a Friday closing of $3.12.

ValueVision has been hammered with losses the past two years -- and a year ago its management was publicly lambasted by investors -- but management insists the company is turning the corner. When the company released its latest quarterly earnings report last month, Keith Stewart, ShopNBC president and CEO, said, "I am highly encouraged about the progress made during the first half of the year. Year-to-date EBITDA [earnings before interest, taxes, depreciation and amortization], as adjusted, is $10.5 million better than last year. These steps are a necessary precursor to improved sales and profits."

Other local companies that have been on the rebound recently include:

Caribou Coffee (CBOU). Apparently, coffee aficionados haven't given up their premium brews entirely. Last year, the coffeehouse chains, such as Caribou and Starbucks, were hit particularly hard by the recession as consumers scaled back on discretionary spending, but both stocks have managed strong comebacks this year.

After reaching a high of about $7 in October 2007, Caribou shares fell steadily to a low of $1.10 before climbing back to nearly $9 a share last month. It closed Friday at $7.41. Despite the pullback in consumer spending, the company has been able to keep its revenue flat and improve its operating numbers. It reported an operating loss of $30.4 million in 2007 and $9.5 million in 2008, but has posted an operating gain of about $3 million the past three quarters.

The Brooklyn Center chain operates about 500 coffee shops, primarily in the Midwest. Its chief competitor, Seattle-based Starbucks, has also enjoyed a nice recovery. After dropping from a high of about $38 in October 2007 to just $7 a share last November, Starbucks (SBUX) has rebounded steadily to a Friday closing of $19.02 a share.

Famous Dave's of America (DAVE). Apparently barbecue lovers are no more willing to part with their ribs than coffee drinkers are to part with their joe. Famous Dave's, which dropped from over $22 a share in October 2007 to just $2 a share in March, has more than doubled in the past six months, closing at $5.42 a share Friday. Although revenue has been down the past year, earnings per share have actually increased. The company reported earnings per share of 40 cents through the first half of this year compared with 32 cents a share a year earlier.

Target (TGT). After reaching a low of about $25 in March, Target shares have nearly doubled, closing at $47.12 Friday. The discount retailer has continued to post solid earnings, revenue and operating earnings.

Some of the stocks that held up the best in the midst of the market freefall have had a hard time gaining traction in the rally. McDonald's, General Mills and Wal-Mart, which all held fairly steady through 2008, are down slightly through the first eight months of this year.

Gene Walden lives in the Twin Cities and is the author of more than 20 books about business and investing. Send questions to gwalden100@comcast.net.