The Buffalo Niagara region's stocks finished the quarter with a flourish strong enough to keep pace with a strong overall market.
Thanks to a final-week surge, the Buffalo Portfolio grew by 7.9 percent during the second quarter -- its best return in the last five quarters -- to outpace all of the major market indexes except for the Dow Jones industrial average.
Overall, investors were in a mood to be pleasantly surprised during the second quarter, which was good news for a handful of the region's stocks but led to less spectacular returns for the broader stable of locally-based companies.
After an uneventful first quarter that saw the Buffalo Portfolio gain 1.7 percent in an otherwise stagnant stock market, the local stocks made a good second-quarter showing in a stock market that was driven by stronger-than-expected earnings.
Nationally, first-quarter profits grew by 7.84 percent, according to Standard & Poor's, which was almost double the initial estimate of about 4 percent growth. That put investors in a good mood to begin the quarter and helped push the Dow up by 5.7 percent in April, after a tenuous February and March.
It was those nice earnings surprises that drove the biggest winners in the Buffalo Portfolio during the second quarter, with Astronics Corp., Graham Corp. and Columbus McKinnon shares all surging after reporting surprisingly strong profits. For Astronics and Graham, the surges reversed the losses the shares endured after investors hammered the stocks last year following disappointing earnings reports.
"I think, with Astronics and Graham, it wasn't so much an overreaction to their beating their numbers," said Christopher Carosa, who runs the Bullfinch Funds' Greater Western New York Series mutual fund, which holds shares in both companies. "It was probably more of an overreaction last year to them missing their numbers."
As a result, the Buffalo Portfolio posted its fourth consecutive quarterly gain and its eighth up quarter in the last nine, leaving the local stocks up 9.7 percent for the first half of the year.
That upward bias was apparent within the Buffalo Portfolio during the second quarter. While 13 of the local stocks went up, just eight went down. Five of the local stocks jumped by more than 20 percent and eight turned in double-digit gains.
Sovran Self Storage, the Williamsville-based self storage chain operator, was the only local stock to lose more than 10 percent, dropping by 13.1 percent as the weakening real estate market weighed on investors.
That helped the local stocks keep up with the overall market. While the local stocks lagged behind the 8.5 percent gain by the Dow, they topped the 5.8 percent rise in the Standard & Poor's 500 and nipped the Nasdaq Composite index, which jumped by 7.5 percent.
Among the local stocks, Astronics was the highest flier, soaring by 80 percent as the East Aurora aircraft lighting and electronics maker's profits shot up because of strong demand for its cabin electronics equipment.
"Astronics has been just on a tear," Carosa said.
Astronics sent investors into a joyful tizzy after reporting that its first-quarter sales surged by 70 percent and profits more than tripled. In each case, that sales and profit growth was almost three times faster than investors were expecting, although Astronics Chief Executive Peter Gundermann warned them not to expect the first-quarter growth rate to continue. He suggested averaging Astronics' weak fourth quarter and the strong first quarter would provide a more accurate picture of the company's performance.
Graham's stock also stayed as hot as its key energy markets. The Batavia-based manufacturer of heat transfer and vacuum equipment's shares shot up by 71 percent during the quarter.
That jump was sparked by the company's strong start to the year, with profits more than tripling and sales rising by 31 percent during the first three months of this year as Graham improved its productivity and expanded its capacity to overcome growing pains that had hurt the stock last year.
James R. Lines, Graham's president and chief operating officer, said he expects Graham to keep growing for the next two years, although he predicted that sales in the current fiscal year may rise by just half to a third of last year's 39 percent growth rate.
It was a similar story for Columbus McKinnon, the Amherst-based material handling equipment maker, whose stock jumped by 36 percent in the quarter.
Like Graham and Astronics, its profits during the first three months of this year easily topped analyst forecasts as the company cashed in on its long-standing push to pay off its debt and increase its productivity. That allowed Columbus McKinnon to boost its profits from operations by a third during the quarter, even though its sales grew by just 7 percent.
That push continued Friday with Columbus McKinnon freeing up nearly $5 million that it will use to pay down debt through the sale and lease-back of a North Carolina plant that had excess capacity because of the productivity gains.
Among the losers, Sovran Self Storage's stock slid by 13 percent as concerns about the weakening U.S. real estate market overshadowed the company's 16 percent jump in first-quarter profits, which fell just shy of analyst expectations.
M&T Bank had the second-worst quarter among the local stocks, dropping by nearly 8 percent, after a type of risky mortgage cut into its first-quarter profits.