It?s been an up-and-down year for the U.S. economy, but The Examiner Top 10 held its own in 2007.
The portfolio of 10 of the largest publicly traded companies with a significant presence in the Baltimore region produced a total return of 8.3 percent during the year, outpacing the S&P 500 ? a trusted measuring stick for the stock market ? which yielded a modest return of 4.2 percent. That would be the index?s lowest return since 2002, when the S&P 500 decreased 22 percent.
The S&P 500, which closed Friday at 1,478.49, was as low as 1,363.98 in March and as high as 1,576.09 in October, but in general, stocks produced positive returns for investors, despite talks of a recession, increasing energy prices, the subprime crisis and the weakening of the dollar.
“The long-term return of the stock market is just superb,” said Joel N. Morse, a professor of finance at the Merrick School of Business of the University of Baltimore. “In 10- and 20-year periods, it always beats bonds.”
PNC investment analysts predicted stronger returns in 2007, with forecasts ranging from 9 percent to 13 percent.
“Our forecasts were met with mixed success for the year. The stock market is likely to finish below our target range,” said E. William Stone, chief investment strategist for PNC.
“S&P 500 companies were on pace to post much-better-than-expected earnings until the subprime crisis caused large earnings declines for many financial companies,” Stone said.
Foundation Coal proved to be the biggest winner in the portfolio ? share price increased 63 percent from the beginning of 2007. At the beginning of the year, Foundation?s share price was $31.75 but has increased to $51.76 on the strength of its position in the coal market as the fourth-largest U.S. coal miner.
Constellation Energy was another big winner for investors in 2007, as the electricity supplier?s share price jumped 50 percent from $68.70 to $103.03. T. Rowe Price also showed gains throughout the year, increasing 37.6 percent from $43.75 to $60.18.
On the flip side, Legg Mason was the big loser of the portfolio. Its stock has declined since the company conducted an asset swap with Citigroup two years ago in which Citigroup took on Legg Mason?s brokerage and capital market units and Legg Mason received Citigroup?s asset-management business. Legg Mason?s stock price is down 25 percent from $95 at the beginning of the year to $71.23.
Black & Decker, a victim of the slow housing market, saw its stock price drop 13 percent from $79.90 to $69.50.
Morse said the stock market will continue to produce positive results because U.S. businesses are constantly evolving and looking to expand.
“Nothing would stop the innovation we?re seeing in this economy,” Morse said.
