The Bottom 50: Diverse and mostly profitable

  • Article by: NEAL ST. ANTHONY
  • Star Tribune
  • April 23, 2011 - 1:47 PM

An explosive oil-and-gas outfit, resurgent technology companies, a profit-heavy biotech firm in northeast Minneapolis and an iron-ore trust with only four years left to live sparked a 9.4 percent increase in sales among the "Bottom 50" companies of the Star Tribune 100 in 2010.

The aggregate market value of these small-capitalization firms rose 36 percent compared with an 8 percent gain in value for the entire Star Tribune 100. Of course, it's easier to grow fast off a smaller base.

Forty of the Bottom 50 increased sales, and 36 were profitable last year.

Among the eyebrow-raisers is Northern Oil and Gas, a play on oil reserves under western North Dakota and Montana known as the Bakken and Three Forks fields. The Wayzata-based company, which went public four years ago, leases thousands of acres from landowners for exploration and drilling.

Northern Oil, benefiting from the recent acceleration in oil prices, saw 2010 revenue increase by nearly 300 percent to $59.5 million. That's the largest revenue increase among the Bottom 50 firms and enough to move "NOG'' from No. 108 in 2009 among Minnesota public companies to No. 76 in 2010.

The company, which expects to produce up to 7,100 barrels of oil daily this year, saw its stock price more than double and its market value soar to $1.5 billion.

There's fur flying among bulls and bears over this one. CEO Michael Reger, 35, a North Dakota native whose family started this business as a private concern years ago, has sold millions of dollars worth of stock amid the price runup.

Short sellers (detractors who profit when a stock drops in price) now control one-in-five outstanding shares in Northern. The price has fallen from $33 per share to around $22 in recent weeks. The bears on "NOG" contend the company is too optimistic in calculating rates at which its wells are depleted.

Reger said recently he's encouraged by the pace of acreage acquisitions and productivity and that its depletion calculations are "in the midrange of our peer group" of other companies that are exploring for oil in the vast Bakken neighborhood. Supportive analysts project that this company should be worth $35 per share or more by the end of the year.

CyberOptics, which benefitted from the high-tech manufacturing rebound last year, saw revenue grow by 110 percent as it moved from No. 95 to No. 78 on the Star Tribune 100 list thanks to increased sales of its sensors and inspection systems that serve the electronics assembly and semiconductor capital equipment markets.

Chief Executive Kathleen Iverson said the company is getting a boost from the solar-energy manufacturing push.

"We believe our participation in the solar market has substantial potential for the full year," she said recently. "We expect to continue capitalizing upon the ongoing upturn of the global electronics market.''

CyberOptics, which traded around $15 in 2006, fell to $5 per share at the bottom of the recession in 2009. It has traded between $8 and $10 per share lately.

Datalink moved from No. 63 to No. 53 as revenue rose 65 percent to a record $294 million in 2010 and earnings were the best since 2006. The Chanhassen firm designs and manages data centers for large and medium-size companies. The company had record revenue from sales of products and service in the fourth quarter, said CEO Paul Lidsky.

"Our investments in our expanded data center portfolio ... and our ability to continue to deliver unified platforms to our customers should fuel growth in 2011," Lidsky said.

Techne Corp., the Minneapolis-based biotechnology firm, was the most profitable member of the Bottom 50 with earnings of $111.2 million. Techne, ranked No. 56, also boasts the largest market value among the Bottom 50 companies at $2.75 billion.

The company, which is expected to have revenue of about $300 million this fiscal year, has been a favorite among long-term investors. The global developer of biotech products has a whopping profit margin of about 40 percent and pays a generous dividend.

Great Northern Iron Ore Properties is a little-known outfit that dates to the days of the railroad barons. It moved up to No. 92 in 2010 on the strength of revenue tied to the resurgent Iron Range. Great Northern ended up with fourth-highest profits last year among the Bottom 50. Great Northern distributes almost all of its income to shareholders, which gives it a whopping 9 percent yield at recent stock prices.

More than a century ago, Great Northern Railway Chairman James J. Hill and his son Louis acquired mineral rights to thousands of acres of Iron Range land. Those mineral rights, which could not be owned by the railroad under existing law, eventually came to be owned by stockholders of the railroad and traded on the New York Stock Exchange as Great Northern Iron Ore.

The stock, which represents a trust, traded at more than $150 per share for a few weeks last year and has traded recently around $105. The trust dissolves on April 6, 2015; then the shares will cease to trade and the remaining assets will be distributed to shareholders of record.

Neal St. Anthony • 612-673-7144

© 2018 Star Tribune