In a down overall market to start the year, local stocks weren’t able to escape without damage.
Shares of 35 of the 50 biggest companies in Illinois and northwest Indiana reported losses in the first quarter, and just 21 managed to outperform the benchmark Standard & Poor’s 500 index’s 2.6 percent drop.
Results have been better over the past year, however, with 33 of the 47 that were traded for the full 12 months posting gains, and 27 of them outperforming the S&P 500’s 4.8 percent gain.
Although some analysts remain optimistic that things will turn around, particularly in the second half of the year, others are skeptical.
“Investors found little to cheer about” in the first three months of the year, wrote Morningstar’s Laura Pavlenko Lutton in a recent report.
“Many of the trends that proved difficult for stocks in the first quarter will likely continue through much of 2005,” Lutton said. “The Federal Reserve has signaled it will continue to raise interest rates, and oil and gas prices have remained high due to robust worldwide demand.”
Amid a series of seven quarter-point Federal Reserve interest rate hikes dating to June, investors have been revamping portfolios to adjust to the changing environment and what many analysts expect will be an economic slowdown in the second half of the year.
Merrill Lynch analysts say that, historically, defensive stocks, including tobacco, pharmaceuticals, insurers, food and drug retailers, utilities and defense issues, tend to be the best bets after a series of four Fed rate hikes and beyond.
Analysts are furiously debating when the Fed will back off, but David Rosenberg, chief North American economist for Merrill, said come summer investors might want to consider stocks that have done well when the Fed stops hikes: banks, brokers, real estate, personal-care products, food and beverage producers, and some other defensive sectors.
Meanwhile, Charles Schwab sector analyst Brad Sorensen said his strongest underweight is the consumer discretionary sector.
“The reason is the strong link between consumer spending and energy,” he wrote recently.
“Higher energy prices … are just now beginning to have a noticeable impact on the low- to middle-income consumer who is going to be spending more money to fill up their tanks and heat their homes and have less to spend on items considered discretionary, such as clothing, home improvement products and travel,” Sorensen wrote.
Locally, consumer discretionary stocks have had mixed results.
Lincolnshire-based Fortune Brands, Itasca-based OfficeMax and Hoffman Estates-based Sears Holdings outperformed the S&P 500 in the first quarter, while Lake Forest-based Brunswick, Oak Brook-based McDonald’s and Chicago-based Tribune underperformed.
Schwab analyst Amit Dugar, however, considers McDonald’s one of nine most likely “reliable performers,” saying it has “worldwide brand recognition that has helped the company show better sales growth than the average S&P 500 stock over the last three years.”
Sears Holdings, created by the merger of Sears Roebuck and Kmart, was one of the top performers, with a 34.6 percent gain in the quarter. It has been the best performing stock in the past 12 months, with a 221 percent gain.
The best performer in the quarter was Schaumburg-based American Pharmaceutical Partners, with a 38.3 percent gain.
Two of the top five performers for both the quarter and 12 months were Chicago-based Boeing and Deerfield-based Walgreen. Morningstar analyst Mitchell Corwin last week raised his fair value estimate on Walgreen, saying it “remains a premier retailer and, by far, the best drugstore chain.”
At the bottom of the top 50 list was Chicago-based Smurfit-Stone Container, with a 17.2 percent loss in the quarter.
For the past 12 months, the biggest decline belonged to Hoffman Estates-based Career Education, which has seen its stock hurt by investigations into allegations that it inflated enrollment figures and mismanaged federal student aid. Shares dropped 39.4 percent.
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Chicago stock review
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RANK COMPANY MAR. 31 3-MO. 12-MO.
CLOSE CHANGE CHANGE
1 Abbott Labs $46.62 -0.06% 21.28%
2 Kraft Foods $33.05 -7.19% 3.25%
3 Boeing $58.46 12.92% 42.34%
4 Walgreen $44.42 15.77% 34.81%
5 McDonald’s $31.14 -2.87% 9.00%
6 Allstate $54.06 4.52% 18.92%
7 Motorola $14.97 -12.97% -4.97%
8 Caterpillar $91.44 -6.23% 15.64%
9 Exelon $45.89 4.13% 33.27%
10 Illinois Tool Works $89.53 -3.40% 13.00%
11 Baxter Intl. $33.98 -1.62% 10.00%
12 Sara Lee $22.16 -8.20% 1.37%
13 Deere $67.13 -9.77% -3.15%
14 Archer Daniels Mid. $24.58 10.17% 45.70%
15 Wm. Wrigley Jr. $65.57 -5.23% 10.91%
16 Tribune $39.87 -5.39% -20.96%
17 Sears Holdings * $133.17 34.58% 221.05%
18 Equity Office Prop. $30.13 3.47% 4.29%
19 Fortune Brands $80.63 4.47% 5.22%
20 Northern Trust $43.44 -10.58% -6.76%
21 Equity Residential $32.21 -10.97% 7.91%
22 Gen. Growth Prop. $34.10 -5.70% -2.99%
23 Aon $22.84 -4.27% -18.17%
24 CNA Financial $28.06 4.90% 1.81%
25 R.R. Donnelley $31.62 -10.40% 4.53%
26 Chicago Merc. Exch. $194.03 -15.16% 100.57%
27 NiSource $22.79 0.04% 7.25%
28 W.W. Grainger $62.27 -6.53% 29.73%
29 Hospira $32.27 -3.67% N/A
30 Molex $26.36 -12.13% -13.26%
31 Tele. & Data Sys. $81.60 6.04% 15.14%
32 CDW $56.68 -14.57% -16.17%
33 Brunswick $46.85 -5.35% 14.74%
34 Alberto-Culver $47.86 -1.46% 9.10%
35 Old Republic $23.29 -7.94% -5.17%
36 ServiceMaster $13.50 -2.10% 12.41%
37 U.S. Cellular $45.63 1.94% 18.06%
38 Smurfit-Stone $15.47 -17.18% -12.00%
39 Navteq $43.35 -6.49% N/A
40 Amer. Pharma. Ptrs. $51.74 38.31% 10.32%
41 Career Education $34.26 -14.35% -39.42%
42 Pactiv $23.35 -7.67% 4.94%
43 Zebra Technologies $47.49 -15.62% 2.69%
44 Tellabs $7.30 -15.02% -15.70%
45 Nuveen Investments $34.32 -13.05% 23.19%
46 Hewitt Associates $26.60 -16.90% -16.90%
47 OfficeMax $33.50 6.76% -3.32%
48 Unitrin $45.40 -0.11% 5.83%
49 Trizec Properties $19.00 0.42% 10.79%
50 Calamos Asset Mgmt. $26.92 -0.30% N/A
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Source: Bloomberg
* Performance figures based on former Kmart stock
More Chicago listings: chicagotribune.com/go/chicagostocksHow the stocks of the 50 largest publicly traded companies in the Chicago area fared over the first quarter and past 12 months.
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acountryman@tribune.com
