First published Oct. 6, 2008
Quick, which publicly traded Seattle financial services giant ceased to exist in September leaving a whole lot of smiling, happy shareholders in its wake? That would be Safeco. Liberty Mutual Group completed its $68.25-a-share purchase of Safeco on Sept. 22. The share price closed that day at $68.21, up 25 percent from its price on Jan. 2.
The example goes to show that even amidst some severe market turmoil, there are still companies doing well, and still stocks that make sense for investors. That seems particularly 
true here in Washington, where our self-styled CEO Washington Index* – which tracks the stock of 20 of the state’s largest companies – out-performed the Dow, the S&P 500 and the Nasdaq composites for the quarter, and year-to-date. Our index is down 13 percent for the year, but slipped only 0.4 percent in the third quarter on some strong performances.
WaMu, of course, wasn’t one of the success stories. The New York Stock Exchange suspended trading of WM shares on Sept. 29, after the forced sale of WaMu’s core banking assets to JPMorgan Chase. WaMu still exists – at least an empty shell of a holding company – and the stock is now trading over-the-counter. It ended September at 8 cents a share, a 99.6 percent decline from the start of the year.
The other stock showing a serious decline: Expedia. Its shares are down 50.5 percent so far this year, and it fell nearly 18 percent in the third quarter, as investors moved away from industries that rely on shaky consumer spending, despite some up-beat analysis.
So where did the money go? A lot of it went to timber stocks. Plum Creek shares had a strong 10.6 percent gain for the quarter, and Potlatch increased a more-modest 2.8 percent. What’s the attraction? Dividends. In a volatile stock market, the big dividend payments guaranteed by Plum Creek and Potlatch’s status as Real Estate Investment Trusts are more attractive than ever. Weyerhaeuser isn’t a REIT – but it announced in September that it could make the switch in 2009. That news sparked a $5-a-share jump in the price, and helped WY finish the third quarter up more than 18 percent (although it’s still down 15 percent for the year).
The biggest upward movers, however, were two regional banks: Everett-based Frontier, which was up 58 percent for the quarter, and Sterling Financial of Spokane, up a whopping 250 percent. Both banks, it seems, benefited strongly from the Security and Exchange Commission’s temporary ban on short-selling. Both stocks have been heavily shorted this year, with between 10 and 20 percent of their outstanding shares tied up by investors betting the stock price would fall. The short-selling ban was set to expire Oct. 2, but the SEC last week was considering extending it further.
One more interesting stock to watch – TruBlue Inc., the Tacoma-based parent company of Labor Ready. Savvy watchers of the economy look to temporary services firms like TBI as an indicator of a rebound in the economy, as employers coming out of a downturn will add a temp worker rather than risk hiring someone permanent. TruBlue shares are up 22 percent year-to-date. That says to me that investors are loading up on shares in anticipation the company will win big whenever the economy finally turns.
* Our CEO Washington Index is comprised of what were the 12 largest companies in the state in 2007: (MSFT, WM, SBUX, COST, WY, PCAR, AMZN, JWN, EXPD, PCL, SAF and EXPE); plus the eight largest companies from outside King County (PCH, STSA, IN, AVA, ITRI, FTBK, TBI, ZUMZ). With the demise of WM, and the sale of SAF, we’ll have to change the line-up for the fourth quarter report.
