Investors in southeastern Wisconsin would have fared better in 2004 by investing their money in the stocks of companies in their own backyard than in the stocks of the Dow Jones Industrial Average.
The BizTimes Stock Index, which tracks the combined value of the stocks of the 36 publicly traded companies based in southeastern Wisconsin, gained 7.5 percent in the year. The local stock index, which was created by Small Business Times, began 2004 at 142.62 and ended the year at 153.33.
By contrast, the Dow gained just 3.1 percent to end the year at 10,783.01.
The rise in the local stock index was fueled by the rebirth of the manufacturing sector. Twenty-three of 23 of the 36 companies tracked in the BizTimes Stock Index are involved in manufacturing, reflecting the region’s heavy reliance on the sector.
That sector was strong in the second half of 2004, as the value of the U.S. dollar fell. A falling dollar means American manufacturers can sell their products cheaper to customers overseas.
All but six of the 36 publicly held companies in the BizTimes Stock Index gained ground in 2004 (see accompanying charts).
The top-performing southeastern Wisconsin stock of 2004 was Oilgear Co. The Milwaukee-based company, which is headquartered at 2300 S. 51st St., manufactures and distributes engineered fluid power components and electronic controls for industrial machinery.
Oilgear’s product line includes hydraulic pumps, high-pressure intensifier pumps, valves, controls, cylinders, motors and fluid meters. The company, which has 300 employees in Wisconsin, manufactured the hydraulic system that opens and closes the wings of the Burke Briese Soleil at the Milwaukee Art Museum’s Calatrava addition.
Oilgear’s products are sold in the United States, Canada, Europe, Asia, Latin America, Australia and Africa.
David Zuege, president and chief executive officer of Oilgear, remains cautiously optimistic about his firm’s outlook after a couple of difficult years in the hydraulic pump industry.
"We’ve had a good business turnaround. We’re rebounding off the bottom. We had a very good year in 2004. Orders are good. Backlogs are up. It’s a turnaround type of deal," Zuege told SBT.
A falling U.S. dollar will benefit Oilgear, because the company can sell its products at more affordable prices overseas, Zuege said.
"When the dollar is very strong, it puts us at a big disadvantage in Europe. Now that the dollar has reached a more reasonable level, it makes it easier," Zuege said.
Because Oilgear is a relatively small publicly held company, its costs to comply with the federal Sarbanes Oxley accounting act were a significant burden, Zuege said.
When asked if that burden might prompt the company to consider becoming privately held, Zuege said, "Well, certainly, you’ve seen a lot of firms that have done that. I can’t comment on that. But I would say that most companies that are in our situation have to be looking at alternatives to these high, onerous costs."
The second-ranked local firm in the BizTimes Stock Index in 2004, Total Logistics Inc. of Milwaukee, announced in the first week of January that its board of directors has approved and executed a definitive agreement for the company to be acquired by SuperValu Inc. of Eden Prairie, Minn. With the acquisition, common stockholders of Total Logistics will receive $28.50 per share in cash, and the total value of the transaction is estimated at $233 million, including the assumption of debt.
Shareholders of Total Logistics enjoyed a stock run-up prior to the acquisition. Total Logistics, which was formerly known as C2 Inc., was originally launched with an initial public offering of stock that sold for $4 per share in 1999.
William Donovan, president and chief executive officer of Total Logistics, told SBT the acquisition resulted from an "unsolicited expression of interest" by SuperValu.
"This business was not for sale. They came to us with a unique, strategic situation to buy our whole company," Donovan said.
All five of the top-performing southeastern Wisconsin stocks and nine of the top 10 in 2004 were manufacturers, reflecting the overall strength of the industrial sector.
Although Wisconsin has lost more than 100,000 manufacturing jobs since 2001 and many small tool-and-die shops in the state have closed forever, the manufacturing companies that survived the recession became more efficient and productive and found ways to compete overseas.
Local stocks dipped in the first week of the new year, but with the value of the U.S. dollar is expected to continue dropping in 2005. Michael Knetter, economist and dean of the University of Wisconsin School of Business, expects Wisconsin’s manufacturers to continue prospering this year (see accompanying report).
The BizTimes Stock Index was created by Small Business Times and is monitored by North Shore Bank. The index, which measures the stock values of publicly held companies based in southeastern Wisconsin is updated daily and can be viewed at www.biztimes.com.
January 21, 2005, Small Business Times, Milwaukee, WI
