Stock markets in 2008 suffered their worst year since the Great Depression, but no market bellwether was as battered as The Examiner Top 10 portfolio.
The Dow Jones industrial average sunk 33.8 percent in 2008, its third-largest decline ever and the biggest decrease since 1931. The Standard & Poor’s 500 index dropped 38.5 percent, its worst loss since 1937. And the Nasdaq composite index, created in 1971, recorded its worst year with a 40.5 percent loss.
The Examiner Top 10, a collection of 10 publicly traded companies with a significant presence in the Baltimore region, outdid all of those markets, losing an astounding 48.6 percent of its value from the opening bell Jan. 2 to the closing bell Dec. 31.
» Black & Decker
» Ciena Corp.
» Constellation Energy
» Foundation Coal
» JoS. A. Bank Clothiers
» Legg Mason
» Lockheed Martin
» McCormick & Co.
» T. Rowe Price
» Under Armour
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At the beginning of the year, the hypothetical purchase of one share of each of the 10 companies would have cost $568.52. The portfolio’s value on New Year’s Eve? A meager $276.28.
“It was an awful year, a year that very few people had expected,” said Robert Williams, a portfolio manager with Baltimore-Washington Financial Advisors.
A severe credit crunch crippled businesses and consumers throughout the year, leading to job cuts and financial panic. Sinking consumer confidence led to massive stock sell-offs in the second half of the year. And in December, the National Bureau of Economic Research declared the U.S. economy had been in a recession since December 2007.
“We saw the turmoil in the mortgage industry, but it turned out to be much worse than we thought,” Williams said. “All of this bad news came together. 2008 was unique in that respect.”
Baltimore businesses suffer Maryland businesses weren’t immune from the never-ending market volatility in 2008.
Publicly traded companies in the state fared worse than the overall market, as the Bloomberg index of 82 Maryland stocks lost 42.1 percent of its value in 2008.
Baltimore’s biggest company suffered one of the year’s biggest losses. Constellation Energy Group, which made headlines beginning in September when Warren Buffett’s MidAmerican Energy rescued Constellation from the brink of bankruptcy with a plan to buy the utility company. Constellation ultimately rejected the offer and chose to sell half of its nuclear power business to French firm Elecricite de France. When the dust finally settled, Constellation stock lost about 75 percent of its value over the course of the year.
Baltimore’s financial companies also suffered substantial losses, as Legg Mason stock sunk about 70 percent, T. Rowe Price dropped more than 40 percent and Provident Bank, which in December agreed to sell itself to Buffalo, N.Y.-based M&T Bank, lost about 55 of its stock value.
Other known Baltimore-area firms, like Ciena Corp. and Under Armour, struggled through 2008, as well, losing 80 percent and 45 percent of stock value, respectively.
Looking ahead to 2009 Investors are looking forward to 2009 simply on the hope and belief that the year can’t be as rough as 2008.
“It’s hard to imagine a year worse than 2008, so we feel good that 2009 will be a better year for the stock market,” Williams said.
Bill Stone, chief investment strategist for PNC, recommends investors look to large-cap U.S. stocks — like Constellation or Legg Mason — while remaining cautious with international stocks, as the international economies could lag the U.S. economic recession.
“The poorly functioning capital markets and credit crunch pose a higher threat to lower-quality and highly leveraged companies,” Stone said. “But the high-quality, conservatively financed companies are likely in the best position to benefit from the situation, because they can acquire assets and gain market share at a discount in order to grow shareholder value.”
