Minnesota stocks notched another year of gains in 2014

What's red and white, 100 years old, mows, plows, and delivered green for shareholders over the past several years?

The Toro Co.

The manufacturer, which just completed a $25 million expansion of its Bloomington campus, also is a top performer over the last five years among the Bloomberg-Star Tribune 100 index of Minnesota's largest publicly held companies.

Toro did not have a banner stock performance year in 2014, along with fellow industrial likes of Ecolab, Graco and Polaris. However, Toro easily outpaced the major market indexes over the last five years. And the industrials, including 3M Co., have been the best sector to own since the Great Recession, noted Mark Henneman, chief investment officer at Mairs & Power investments.

Toro has innovated and diversified into irrigation and heavy equipment to help drive solid performance. Over the past five years, Toro provided a total annualized return to shareholders of 26 percent, including reinvested dividends. The stock rose from $21.58 per share on Jan. 2, 2010, to a 2014 close of $63.81.

Overall, Minnesota's 100 largest publicly traded companies posted a total return of 8.6 percent in 2014, compared with 13.7 percent for the S&P 500 index of America's largest publicly held companies and 4.9 percent for the Russell 2000 smaller-company index. Minnesota's diversified mix of finance, industrial, food and retail companies have performed well in aggregate. And the state's low exposure to publicly traded energy companies, which tanked last year, helped keep average performance up.

Over the past five years, The Bloomberg-Star Tribune 100 returned 17.5 percent, compounded annually including reinvested dividends, compared with 15.4 percent for the S&P 500 and the Russell 2000 index of companies of less than $2 billion in market capitalization.

The consensus among the Star Tribune board of investment professionals in December was for modest, single-digit returns from the stock market in 2015. It will be tough to top the 40 percent run of the S&P 500 over the last two years. The market is up about 200 percent since the depths of early 2009.

Minnesota's best-performing stock of at least $5 in value last year was Intricon, up 78 percent to a $6.87 per share close. The Arden Hills-based maker of miniature medical devices including hearing aids and diagnostic monitors historically has been a mercurial performer.

3M Co., hitting on most pistons, rose 20 percent last year and 17.5 percent annualized since 2010.

The markets have been driven somewhat by performance and also by late-coming investors who finally recovered from the 2007-09 market swoon.

Last year's stories include:

• Famous Dave's (up 43.6 percent) and Buffalo Wild Wings (up 22.5 percent).

Dave's, under a new CEO with national ambitions, has benefited from resurgent consumer spending at midpriced restaurants.

"The company now is focused on franchised operations, which will accelerate top-line sales growth," said Beth Lilly, Minneapolis-based portfolio manager with New York-based Gabelli Funds. "We bought the stock a few years ago at $8 or $9. It's now around $26 per share."

Buffalo Wild Wings, propelled by big-screen football, soccer and other sports fans, has had an amazing growth run and stock market performance, under CEO Sally Smith. The company has returned a compounded annual return of 34.3 percent since 2010. And it's success has defied the age-old warning about owning historically volatile restaurant stocks. Smith was an accountant and financial executive who came out of the medical industry and has focused on consistency as the chain has scaled up.

The stock has run from about $41 per share in January 2010 to $180.38 per share on Dec. 31, 2014.

• Piper Jaffray, a so-so performer over the years, jumped 47 percent in market value last year on improved performance in a go-go mergers market and predictions of a robust 2015 for investment banks. Piper is up 2.8 percent on a five-year, annualized basis.

• United HealthGroup, up 36.5 percent for the year and 28.9 percent annualized since 2010. CEO Stephen Hemsley proved big insurers can still make a pretty penny on Obama­care. And UnitedHealth continues to grow its profitable supplement business to Medicare, the government-financed insurance program for the elderly.

"The headwinds we face looking into 2015 and beyond diminish significantly, and are more muted, than in recent memory," Hemsley said in December.

Health care companies and utilities were the best performing sectors of the market last year.

And that included Medtronic, up a market-beating 28 percent last year and 13 percent over the last five years. Medtronic is trying to sell shareholders on its merger with Ireland-based Covidien this month. That includes a move to lower-tax Ireland. The company says it plans to continue investing and adding jobs in Minnesota and the merger will be good for all stakeholders.

• Xcel Energy, the nation's leading peddler of electricity generated from wind, was a top performer. The Minneapolis-based utility that focuses on the Midwest, Colorado and Southwest, was up 33.5 percent last year and 15.7 percent annualized over the last five years. Henneman attributed part of Xcel and the utility sector's strength to investors, starved for yield in the bond market, who moved into dividend-paying utilities last year.

At Deluxe Corp., CEO Lee Schram has pulled off a diversification that has Deluxe far-less reliant on its cornerstone check-printing business and focused increasingly on business and e-commerce services for small companies. The stock price rose 21.8 percent in 2014 and 37.4 percent annualized since 2010.

"Lee's first steps were to take out about $400 million in annual costs when he arrived [in 2006-07]," said Lilly, a longtime stockholder. "They did consolidate plants. But he's also grown the company. "It's no mistake that the stock is up 37 percent annualized over the last five years. We've been well-rewarded."

And investors are buying the evolving strategy of new CEO Brian Cornell at Target.

"They still haven't fixed Canada," Henneman said. "It's been a tough retail environment, but things got better as gasoline taxes dropped. And people are getting comfortable around the new CEO. People at Target feel he is slowly putting them on the road to recovery. He didn't just swing an ax. He's been very deliberate."

Target's stock rose 23.8 percent in 2014 and 11.8 percent annualized since 2010.

About a third of the Star Tribune 100 landed in negative territory in 2014. They included TCF Financial, Bio-Techne, Mosaic, SPS Commerce, H.B. Fuller and Northern Oil & Gas. All but 17 of the Strib 100 posted positive returns since 2010. The five-year losers include Northern Oil, Digital River and Urologix.

Neal St. Anthony • 612-673-7144