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While the major
equity indices showed significant gains for 2003, most have yet
to rebound to pre-2000 levels. The S&P 500, for example, remains
21 percent lower today than on Jan. 3, 2000, and NASDAQ stocks are
still 50 percent off.
Yet a number of St. Louis stocks not only held their own during
the prolonged bear market, but many went much farther, posting what
has to be considered phenomenal gains. Consider Engineered Support
Systems (ESS) Inc., which has seen its stock rise a remarkable 1,045
percent since the beginning of the bear market in January 2000.
Scott Harrison, a senior analyst for Argent Capital, says the top
performers, like ESS, were able to develop shrewd business plans—and
then make them happen.
“[Their] performance is something that speaks to their ability to
execute their long-term strategies,” he says.
Although a few of the bear-eaters, such as Arch Coal, have benefited
from what Harrison calls a “macro environment” (in Arch’s case,
higher energy costs), most have been successful by cutting costs
and improving profit margins. In short, they run very tight ships.
“If you’re looking at one broad-based theme, [it’s] productivity,”
Harrison says. “Not only for the national economy and the larger
companies, but it’s the main focus for the smaller companies locally.”
He cites Energizer Holdings as a good example, saying they’ve been
able to execute by focusing on productivity and improving their
margin. “They recently positioned themselves in the razor business
by acquiring Schick,” Harrison says. “They’ll be able to leverage
their distribution.”
The result? A 100 percent gain in their stock price since Jan. 1,
2000.
Then there’s Brown Shoe Co., which Harrison calls a turnaround story.
“They’ve been able to improve margins and cut out costs,” Harrison
says, resulting in a 170 percent stock price increase since January
2000.
The BioBelt has been contributing to the region’s investment success,
as well. Harrison points to K-V Pharmaceutical Co., which manufactures
generic and name brand drugs, and whose stock has enjoyed a 188
percent increase since January 2000. “They have a patented delivery
technology that they apply to those drugs,” he says. “Their strategy
is to acquire drugs that have been forgotten about, and then reaccelerate
and reinvent the potential for the drugs. They have above industry
profitability, and are positioned to continue to grow.”
Another company that has benefited from a macro environment, according
to Harrison, is the TALX Corp.—up 208 percent in the same period.
A designer of software products, the firm has profited from the
mortgage boom of late. “Their software is used for verification
services for mortgage applications,” he says.
Although any of these returns are enough to make the most hardened
investor drool, Harrison cautions that past performance cannot be
considered a guarantee for future returns. Still, he thinks St.
Louis stocks offer a wide diversity of solid investing choices going
forward.
“In St. Louis, you’ll think of the larger companies,” Harrison says,
“but there are companies with the entrepreneurial spirit which are
growing. The important thing for any economy to do well is to have
a diverse infrastructure that it can rely on.”
Bob Schaper is managing editor of St. Louis Commerce Magazine.
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