Star Tribune 100: Minnesota stocks had a record year in 2013

It was a banner year for the stock market and a historic year for Minnesota-based stocks as a group.

The Bloomberg-Star Tribune 100 index of Minnesota's largest publicly owned companies rose 49.3 percent in value in 2013.

That's the best annual performance since the index's creation in 1998.

It beat the total return of the Standard & Poor's 500 index of America's largest public corporations, which was up 32.4 percent, and the Russell 2000 index of smaller companies, which rose 38.8 percent.

"It's fascinating that the Minnesota index outperformed the other indexes, which may mean we are better than the average bear," said Biff Robillard of Bannerstone Capital Management in Deephaven. "More importantly, we have moved away from what looked like the end of the world in 2008, when the economy and financial world was in trouble and the confidence was gone."

Just a year ago, Robillard said, investors seemed bearish — worried about politics in Washington and what could go wrong with the economy. "Once in awhile," he added, "we have to ask, 'What could go right?' "

Last year took the stock market to record highs.

Gainers on the Strib 100 outnumbered losers 79 to 19 in 2013.

On the down side, Select Comfort, the adjustable mattress maker known for wide swings in performance, fell 19 percent in value.

The stock market traded marginally higher on Friday, and is up less than 1 percent in 2014. The Star Tribune's panel of investment analysts expects market returns to slow to single-digit levels this year.

If the stock market rises in 2014, it would be the first time since 1982-88 that the market has increased six years in a row, said Brian Belski, investment strategist at BMO Capital in New York.

The Strib 100 is an index created by Bloomberg, the financial markets information provider, and the Star Tribune to track Minnesota companies as a group.

The Mairs & Power Growth Fund, based in St. Paul, was up 36 percent in 2013 and about 20 percent annually since 2009. At the core of the fund are blue-chip Minnesota and Midwest companies.

"I wouldn't say everything worked last year," said Mairs portfolio manager Mark Henneman. "But the growth fund was driven by the industrial stocks, the most ­economically sensitive companies, and we've been overweighted for a long time in companies such as 3M, Pentair, Toro and Graco."

Those four companies, rose 50 percent or more in value in 2013. That also can be said of industrial staples Tennant Co. and G&K Services.

Two things contributed to the 2013 surge in the value of the market: corporate profits continued to improve and, with interest rates held low by the Federal Reserve, investors who were burned by the market fall of 2008-09, finally returned to the stock market.

An array of Minnesota companies had soaring stock prices.

• G&K, the Minnetonka-based maker of industrial clothing and floor mats, posted strong quarterly earnings in 2013 and improving profit margins as more North American workers got hired, put on uniforms and went to work in factories, restaurants and health care facilities. The stock has risen nearly 86 percent since January 2013. CEO Doug ­Milroy, who is focusing the company on its strongest products and markets, said last fall that recent operating profit ­margins were the best in a decade.

• Graco, the Minneapolis-based maker of pumps and spraying equipment, is benefiting from the resurgent housing and auto industries. Its stock had a total return of 54 percent last year and 268 percent over the last five years. Graco has benefited from a recent acquisition of the finishing businesses of Illinois Tool Works that was messy at first, but has long-term growth prospects. The company, which mostly manufacturers in the United States, also is a huge exporter.

• Toro Co., the mower-and-snowblower company based in Bloomington, has successfully expanded into irrigation and water-conservation and landscaping equipment under CEO Mike Hoffman, a career employee who started out as an equipment repairman. Toro topped $2 billion in sales last year as the stock had a total return of 50 percent in 2013 and 313 percent in the last five years.

• Buffalo Wild Wings, the Golden Valley-based restaurant chain, has defied the average successful life of notoriously volatile eatery stocks. Buffalo Wild Wings was up 100 percent last year and nearly 475 percent since 2009. It was the top performer for Andy Adams, who runs the small-company portfolio at Mairs & Power. "Everything came together for them," he said. "Chicken wing costs came down and profitability improved and they were able to take advantage of national TV advertising as they ­continued to roll out a great model."

Of the 17 Minnesota companies that had flat-to-negative years, the worst performer was the Dolan Co. The financial and legal publisher that went public in 2007 has fallen from postrecession highs over $10 per share to lows of 50 cents per share as it contemplates a shareholder-forced restructuring.