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State stocks had good year, but long-term picture isn't as rosy

Montanans have a long history of allegiance to home-grown stocks and, at least at first blush, that commitment paid off in the market in 2003.

Montana companies like Semitool and Glacier Bancorp thrived, stock-wise, and investors in those companies likely beat the market, which itself turned in handsome gains.

If only it were that simple.

"Yes, Montana companies had a good year, but you can't take one year out of context," said Bob Seidenschwarz, an investment adviser at S.G. Long in Missoula.

For instance. On appearance, a company like the Stillwater Mining Co. in Columbus looks like a huge winner in 2003. And it was, if you bought the stock in January 2003, when it traded for less than $6. The stock, which trades on the New York Stock Exchange under the symbol SWC, closed the year near $10, a healthy 79 percent gain.

"It had a great year, just like almost every mining stock," Seidenschwarz said. "But you have to look at how far it had come down before it started coming back. The question is when did you own it?"

If, for instance, you bought SWC in May of 2002, you paid close to $18. That makes Friday's close of $9.88 look a bit less thrilling.

On the other hand, buyers of United Financial Corp., a Great Falls company that trades under the symbol UBMT on the Nasdaq, were rewarded for their patience. The stock waffled for all of 2002 in a four-dollar range below $16, before finally lifting off in April 2003.

United shares closed the year near $26, a strong 85 percent move above the stock's January price.

"They are well-run and enjoying solid business growth," said Fred Dickson, chief market strategist for D.A. Davidson in the company's Portland office.

So, should Montanans who want to own a part of a Montana company go piling into UBMT, which owns the Heritage Bank in Great Falls, because it had a fabulous year? Maybe, but not necessarily.

"Generally, stocks that have run 75, 80 percent are going to be flat into the next year," Dickson said. "We certainly advise our clients to take some of their profit when the stock runs like that. Maybe you keep your core position but take the profit off and look for another opportunity with it."

Said Seidenschwarz: "Even though they had a great year, you have to ask some questions. What are the company's prospects? What's the competition like? Is management still solid? Has the stock come too far too fast?"

The questions about a company's expectations are important to current investment decisions, but they also highlight a change in the mind-set of the Montana investor.

Montana has never been home to many publicly traded companies, but one of them, Montana Power Co., drew legions of Montana investors who wanted to have stock in the company people called simply "the Power."

"For the past generation, this was the stock you had to own," Seidenschwarz said. "The employees owned it and nothing else in their retirements, and their friends and neighbors owned it. The company had always produced returns and people were just comfortable with it."

Then came deregulation, the transformation to Touch America and the selling off of the company's utility business. Finally, last June, with the company's once-proud stock trading for just pennies, bankruptcy.

"That is the price people paid for getting myopic," Seidenschwarz said. "If you stake everything you have on one company, that's the risk you run."

It happened in the Mission Valley, too, as locals rushed to back the Jore family, which was making good in the tool business. The company went public in 1999, three years after its formation, with the stock opening at $10 and trading as high as $13.19. Two years later the company traded for 27 cents and bankruptcy was in the air.

By mid-2002, the once-public company was in the private hands of a Washington businessman.

"That's the sort of thing where people are standing in line at the store and one guy tells the other guy, 'You really ought to own some of that stock,' " Seidenschwarz said. "People want to do something to help out their neighbors and maybe get in on the next big thing. That's not really the best way to pick stocks, though."

Both Seidenschwarz and Dickson said they've seen a change in Montana investors over the past few years, which encompassed the end of a nasty bear market and onset of another bull run.

"I think we are seeing investors become a lot more savvy," Dickson said. "They are using the wide availability of information to learn much more about companies. Investors have become much more proactive, and they are thinking far beyond the state and the region."

Seidenschwarz agreed: "People are a little more sophisticated now, I'd say. I think they're doing more homework, rather than just saying this is a Montana company. You lose enough money and you get your eyes opened."

Seidenschwarz and Dickson see a generational swing under way, as the generation that grew up with Montana Power yields to the class of investors weaned on CNBC, and Bloomberg Radio.

"People now know a lot more about a company than just the name," Dickson said. "That lets us talk about expectations and earnings, rather than explaining the basic business to the client. That lets us do a better job."

Of course, most Montana investors know what companies like Semitool and Glacier Bancorp (symbol GBCI) do. Their question is what to do with those companies now that the stock prices have made healthy runs.

Semitool, which makes equipment for the semiconductor industry, rallied along with semiconductor stocks in 2003, despite the fact that Semitool hasn't seen a huge influx of new orders. Although stock analysts foresee increased spending on technology, there's no way to know for sure whether that will translate into increased production by semiconductor chip makers.

Semitool's stock price rose more than 72 percent in 2003, but the shares had been pummeled badly in late 2002, along with nearly every other company that has anything to do with semiconductors. Semitool (symbol SMTL) closed at 11.10 on Friday.

"Semiconductor companies were priced for growth in 2003, and they were a logical place to be because they'd been beaten down," Seidenschwarz said. "It was a no-brainer. Now they've come a long, long way. It might be prudent to take something off the table, but keep some sort of core position for the long term."

Glacier Bancorp, whose stock was up about 58 percent in 2003, turns in steady, stellar performances year after year, and it's a stock neither Seidenschwarz nor Dickson would move investors out of.

"It's certainly a company worth holding on to for the long term," Seidenschwarz said. "But you don't go broke taking profits.

"Would I consider taking something off and looking for additional opportunities?" Dickson asked. "Sure I would."

That, Seidenschwarz and Dickson said, is part of the key to successful investing - don't sink everything you have into one company. Just ask the former Montana Power Co./Touch America employees who rode their company stock into financial oblivion.

"I think Montanans have learned some pretty harsh lessons in the past few years, with Touch America and all, and that lesson is that you have to use some common sense," Seidenschwarz said. "I think people have learned to be a little more cautious when they look at investing in a company just because it's local."

Reporter Michael Moore can be reached at 523-5252 or 370-3330, or by e-mail at

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