Local stocks underperform, fare worse than Wall Street

It was a rough 2008 for Boulder Valley-based public companies.

Not only were their stocks down for the year, but their performance as a group fared much worse than the broader U.S. stock indices.

The 10 local stocks on the major exchanges declined 60.4 percent as an evenly weighted portfolio in 2008. That’s worse than the Dow Jones Industrial Average (down 33.5 percent); the Nasdaq Composite (down 40.5 percent); and the S&P 500 (down 38.4 percent) in 2008, as of the market’s close on Dec. 17.

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The results break a two-year run of local stocks outperforming the broader markets. The Boulder Valley stock portfolio was up 47 percent in 2006 and up 15 percent in 2007.

This year, only one local public company managed to beat the DJIA, Nasdaq and S&P. Broomfield-based Ball Corp. (NYSE:BLL) declined 6.3 percent in 2008 – a relative great performance in a tough market. The performance exemplified a national trend of investors seeking safety in larger, more stable companies.

The story was not so good for the remainder of Boulder Valley-based public companies. The nine other local stocks plummeted more than 50 percent each.

Broomfield-based Vail Resorts Inc. (NYSE:MTN) fell nearly 52 percent for the year, as skiers cut back on vacation spending to the slopes and real estate purchases around the resorts.

Broomfield-based Level 3 Communications Inc. (Nasdaq:LVLT) and Boulder-based Aerogrow International Inc. (Nasdaq:AERO) saw both of their stock prices dip below $1 per share, threatening their continued listing on the Nasdaq market, which requires at least $1-per-share prices.

The Nasdaq has temporarily suspended that rule in a tough market but may move to lift the suspension in 2009.

Louisville-based Replidyne Inc. (Nasdaq:RDYN) also saw its stock price slip below $1, but the biopharma firm agreed in November to be bought out by Minnesota-based Cardiovascular Systems Inc.

Broomfield-based Gaiam Inc. (Nasdaq:GAIA) had the largest percentage swing of all the Boulder Valley-based stocks from year to year. The distributor of wellness and home products saw its stock plunge 83 percent in 2008, after increasing 115 percent in 2007.

Niwot-based Crocs Inc. (Nasdaq:CROX) – once the high-flying stock darling of the Boulder Valley – proved its colorful shoes were just a fad. The stocked tanked 96 percent in 2008 amidst falling revenues and steeper losses. Crocs’ stock fared the worse among local stocks.

So what’s ahead for 2009? Local wealth managers declined to comment on specific stocks, but said generally there will be some opportunities out there.

“Price-to-earning ratios are historically low, and typically that means better stock market returns are ahead,´ said Robert Pyle with Boulder-based Diversified Asset Management Inc.

Investors could also consider the strategy of “tax-loss harvesting,” selling some losing funds, taking the loss on this year’s taxes and then replacing those investments with similar funds to rebalance the portfolio, Pyle said.

There is no limit to tax-loss harvesting, but if you also had gains in the year, only up to $3,000 in excess losses from those gains can be applied against ordinary income each year, with any remaining losses carried forward to future tax years.

Dan Figliola with Coldstream’s wealth-management office in Boulder, said investors should stick to proven long-term strategies, such as rebalancing one’s portfolio.

“We as a firm believe it makes more sense to be methodical with our investment strategy during these times,” Figliola said. “We’re not trying to time the market and call bottom. We recommend that investors rebalance their portfolio over time, whether that be monthly or quarterly.”

Rebalancing one’s portfolio doesn’t necessarily imply having exact equal investments in each sector, he said. Depending on an investor’s individual profile, there may be some different balancing techniques.

“There has been no corner of the market that hasn’t been hit,” Figliola said. “That being said, there are some sectors of the market that have more value, so we are cautiously overweighting some sectors.”

Contact writer David Clucas at 303-440-4950 or e-mail dclucas@bcbr.com.