Byline: Sheena Harrison
While the state remains in an economic slump compared to the rest of the country, Michigan public companies managed to perform on par with Standard & Poor's 500 Index in 2006.
Stock analysts say the results show that Michigan could be on track to perform 'reasonably well'' in 2007.
'If you can assume the stock market is a reasonable gauge for economic activity, you can assume in 2007 we may see marginal improvement in Michigan business conditions,'' said David Sowerby, portfolio manager and chief equity analyst for Bloomfield Hills-based Loomis Sayles & Co.
The average stock price for Michigan public companies increased by about 14.5 percent in 2006, compared with 14.1 percent for the S&P 500.
Among the Southeast Michigan companies helping to drive the growth was United American Healthcare Corp. (Nasdaq: UAHC), a Detroit-based health maintenance organization and management company. United American stock closed at $8.53 on Dec. 28, compared with $2.40 at the end of 2005.
The company is best known in Michigan for having operated OmniCare Health Plan, whose assets were sold out of state receivership to Coventry Health of Michigan in October 2004. United American said last month it had raised $6.5 million through the sale of 1 million newly issued shares of its common stock.
United American said in October that its sole subsidiary was certified to manage a Medicare Advantage contract in Tennessee. That contract that has generated optimism about United American's prospects, said Jeff Lambert president of Grand Rapids-based investor-relations firm Lambert, Edwards & Associates Inc.
'UAHC is benefiting, from a stock-price perspective, from people looking into the future of what they can achieve,'' said Lambert, whose company represents United American. 'It's both `What have you done for me lately?' and `What can you achieve for me in the future?' ''
Other health care firms contributed to overall stock price growth, including Wixom-based Rockwell Medical Technologies Inc., which increased by 58.8 percent, and Detroit-based Caraco Pharmaceutical Laboratories Ltd., which grew by 48.8 percent.
Dana Johnson, senior vice president and chief economist at Comerica Bank, said those companies likely have benefited from health care becoming one of Michigan's strongest industries.
'That is a sector that's resilient, not highly cyclical, where demand is growing,'' Johnson said.
Not surprisingly, some of the state's biggest losers came from the still-slumping automotive industry. Dura Automotive Systems Inc., which filed for bankruptcy in October, saw its stock price drop by nearly 78 percent to 50 cents on Dec. 28, down from $2.24 at the end of last year.
Also near the bottom of the list was Livonia-based coupon-maker Valassis Communications Corp., whose stock price fell by 50 percent after it went to court to back out of a merger agreement with direct-mail giant Advo Inc. of Windsor, Conn. The companies dropped their lawsuits after they worked out a new $1.2 billion merger deal in December.
Troy-based music and entertainment distributor Handleman Co. also fell into the bottom 10 public companies, with a 45.25 percent decline in stock price in the last year. Handleman said it was hurt by startup costs from a new greeting-card business in the U.K. and a continued industrywide slump in music sales.
Still, Sowerby said businesses in the state have performed rather well despite the sagging economy, and he expects the average Michigan company could see a 10 percent to 12 percent gain in earnings during 2007.
He said he's particularly encouraged by price growth in the last quarter of 2006 - when Michigan stocks grew by about 9 percent.
'I'd rather see momentum building into the following year rather than staggering into the next year,'' Sowerby said.
Sheena Harrison: (313) 446-0325, sharrison@crain.com
