It was good to be invested in local retail stocks in 2010. Same goes for the state’s big regional banks.
While shares of most companies based in Columbus outperformed the main stock-market averages, retail and bank stocks left the shares of many other big companies in the dust.
Shares of retailers Abercrombie & Fitch and Limited Brands, for example, jumped 65 and 60 percent, respectively, last year. Shoe retailer DSW’s stock soared 51 percent.
Meanwhile, Huntington Bancshares’ stock jumped 88 percent, while shares of Cleveland-based KeyCorp and Cincinnati-based Fifth Third rose about 50 percent. Newark-based Park National Bank saw its shares rise 23 percent.
The gains don’t take into account dividends.
That retailers and banks did well for a second straight year is a reflection of an economy that’s improving after the recession, and of better days for consumers who power the economy, analysts say.
There were worries that Huntington and many other major banks would fail as the financial crisis two years ago froze credit markets and more homeowners fell behind on their mortgage payments.
Huntington shares, which fell to $1 in 2009, are back to nearly $7.
Ric Dillon, CEO of Columbus investment-advisory firm Diamond Hill Capital Management, said of Huntington and other banks: “Not only have they survived, but they seemed to gain more solid footing in terms of operations and profits, and some of the credit concerns, while not alleviated, are not as severe.”
Huntington, like many other banks, returned to profitability in the first quarter of 2010. It also announced a plan to add branch offices, remodel existing ones and invest in new programs that, for example, give customers 24 hours to cover an overdraft without a fee. In December, the bank repaid $1.4 billion it had borrowed from the government during the financial crisis.
“We believe our strong stock-price performance reflects increasing confidence in the strength of Huntington’s franchise and financial-performance prospects,” said Jay Gould, Huntington’s director of investor relations.
Retailers, meanwhile, did a good job of cutting costs and controlling inventories during the recession, and that has led to profit margins that are their highest in decades, Diamond Hill’s Dillon said.
“These severe, challenging times focus one’s attention like nothing else,” he said. “It’s easy to be complacent when everything is good.”
At the same time, consumers have come back to the mall quicker than many analysts expected, given the high unemployment rate and continued worries about the housing market.
“I didn’t envision that it would be as good (a) year as it has become,” said James W. Coons, principal of
investment-management firm Coons Advisors.
Not that 2010 didn’t have its scary moments.
Stocks rose at the beginning of the year but then tumbled in the spring and summer amid concerns that the economy was going to fall back into recession.
To make matters worse, the “flash crash” on May 6 sent the Dow Jones industrial average falling off a cliff. The Dow plummeted nearly 700 points in less than a half hour, making the intraday loss nearly 1,000 points, but it then quickly recouped most of the midday plunge.
A government report later blamed the plunge on an unusual order placed by a firm that set off a cascade of selling.
But the result — coupled with a stock market that basically has been flat for a decade — helped keep many individual investors on the sidelines.
That meant that they
missed the gains in the stock market that began in the summer as Federal Reserve Chairman Ben Bernanke started giving hints that the Fed would buy more government bonds to drive down borrowing costs.
Although long-term interest rates actually rose after the Fed put the plan in place later in the year, it seemed to give a psychological lift to investors that the Fed stood ready to do all it could to keep the economy growing, Coons said.
“It raised people’s confidence in the future,” he said.
That was followed by the November elections, in which Republicans regained control of the U.S. House of Representatives and narrowed the Democrats’ majority in the Senate. The elections were viewed as being more favorable for business and stocks.
Stocks have kept climbing since.
The Dow ended the year 11 percent higher, the broader Standard & Poor’s 500 index of large companies rose 13 percent, and the technology-heavy Nasdaq composite index climbed 17 percent, not counting dividends.
The indexes are at their highest levels since before the September 2008 collapse of investment bank Lehman Brothers, which accelerated the downward spiral of stocks and deepened the recession.
The biggest winners of 2010 were the shares of small companies. The Russell 2000 index rose more than 25 percent.
One local member of that index, Glimcher Realty Trust, saw its shares soar more than 200 percent with dividends included. The mall operator was the No. 1 performer among U.S. real-estate investment trusts last year, said Mark Yale, the company’s executive vice president and CFO.
Like banks, Glimcher has benefited from credit markets that have settled down after the financial crisis. Improving retail sales and a rising occupancy rate in malls also have helped.
The company also has been able to raise money through new stock sales, and it has cut debt.
“It’s been pretty incredible,” Yale said.
He said the jump in Glimcher’s shares is an endorsement of the company’s steps to strengthen its balance sheet and recognition of its real-estate portfolio.
Shares of other small companies in central Ohio jumped as well in 2010.
After skyrocketing 544 percent in 2009, shares of Commercial Vehicle Group rose 171 percent in 2010.
Shares of Pinnacle Data rose 166 percent, and shares of Core Molding Technologies and Pacer International more than doubled.
Other prominent companies in the area that topped the major market indexes included M/I Homes, Worthington Industries, Scotts Miracle-Gro and Cardinal Health.
Not every local stock was a winner in 2010. Excluding dividends, State Auto Financial’s shares fell about 6 percent and DCB Financial sank 54 percent.