It was a wild ride to nowhere for the Buffalo Portfolio in 2011.
With financial turmoil in Europe causing big swings in the stock market last year, the stocks of the publicly traded companies in the Buffalo Niagara region went on a roller coaster ride that featured promising gains and gut-wrenching declines.
In the end, the local stocks, like the broader market in general, ended the year in pretty much the same place as they started, with the value of the Buffalo Portfolio slipping by less than 1 percent in 2011.
But what a trip the Buffalo Portfolio took to get there. The year started out on a promising note, with an 8 percent gain in the first quarter, only to dip slightly in the spring and then plunge by 20 percent during the summer. Only a furious 18.5 percent rally during the final quarter brought the local stocks back close to the break even point for the full year.
It also was a year of marked contrast for the stocks within the Buffalo Portfolio. For Astronics Corp., it was a great year, with the East Aurora aircraft lighting and electronics manufacturer's shares soared by almost 90 percent, one of 11 local stocks that went up last year and one of eight that gained more than 10 percent.
In contrast, it was a rough year for Cleveland BioLabs, the Buffalo biotechnology company whose shares lost 60 percent of their value. Nine local stocks went down last year, with seven posting losses that exceeded 10 percent.
"When the backdrop is as emotionally charged as it is, you can have big swings on seemingly inconsequential information," said Gerald T. Cole, the managing partner at Arbor Capital Management, an Amherst money management firm.
"Then we get the 400 or 500 point swings from one day to the next," Cole said. "It raises everybody's level of discomfort."
It was the worst year for the local stocks since their 31 percent plunge in 2008 and only the third annual decline in the past decade.
The 0.8 percent decline in a portfolio that owned a single share of each of the stocks of companies based in the Buffalo Niagara region was in contrast to the 5.5 percent rise by the Dow Jones industrial average and the 1.8 percent rise by the Nasdaq Composite index. The Standard & Poor's 500 index barely slipped 0.1 percent, making it basically flat for the year.
The tiny dip by the local stocks was not as great as the 5.45 percent drop by the Russell 2000 index of small company stocks, which is the major market index that most closely mimics the Buffalo Portfolio.
"One day we're happy. One day we're sad, and the net result is virtually nothing," said Tim Johnston, the managing partner at Sandhill Investment Management, a Buffalo money management firm.
Much of the market's gyrations have stemmed from the financial turmoil in Europe, where nations from Greece and Spain to Italy are grappling with debt loads that are quickly becoming too heavy to bear. The stock market plunged during the summer when those problems erupted, but rebounded in the fall when it appeared that deals were in the works that could resolve the crisis, at least for the moment.
At the same time, U.S. companies had a good year, with profits strengthening after years of restructuring during the recession left them with less debt, plenty of cash and in a generally strong financial position.
"We remain in a tug of war between the fear that Europe can slow the world, versus the reality of a persistent global earnings recovery" that pushed profits among the 500 big companies that make up the Standard & Poor's 500 index to a record high last year, said Bruce Kaz, the president of Courier Capital Corp., a Buffalo money management firm.
But that tug of war also made for some trying times for investors, who watched the value of their portfolios swing wildly from one week to the next.
"While it doesn't feel so good, it hasn't been extraordinarily painful," said James P. Julian, executive vice president at Robshaw Julian Associates, an Amherst money management firm.
For the second straight year, no stock was stronger than Astronics, whose shares had been crushed in the early days of the recession. After soaring by 146 percent in 2010, Astronics' shares soared again last year as the company continued to reap the benefits of its earlier cost-cutting and a more lucrative mix of sales.
That allowed Astronics' profits to soar by 57 percent through the first three quarters, more than three times faster than its 16 percent increase in overall sales.
Taylor Devices' shares also fared well, surging by 54 percent as demand picked up for the North Tonawanda shock absorber manufacturer's products that help protect buildings and bridges from damage due to earthquakes and high winds.
Since early 2010, there have been major earthquakes in Haiti, Chile, Turkey and Japan, which has focused attention on seismic protection. The slowly improving economy also has helped loosen purse strings that had been tightly shut during the recession. That helped Taylor Devices bring in record sales during the fiscal year that ended in May and continue that upward trend with a 7 percent rise in revenues during the summer quarter.
Buffalo specialty printer Mod-Pac Corp. also had a strong year, with its shares jumping by 33 percent, buoyed by a 37 percent jump in profits through the first three quarters of last year as its custom folding carton and stock packaging businesses both strengthened.
Computer Task Group's shares jumped by 29 percent, riding a wave of strong demand from the health care industry, especially for electronic medical records. Much of CTG's growth is coming from its health care business, where revenues grew 32 percent during the third quarter.
CTG currently is working on 17 electronic medical records projects, a growing source of work for the Buffalo information technology company that its executives believe can continue to expand for years to come.
On the downside, Cleveland Biolabs went from being the Buffalo Portfolio's second-strongest stock in 2010 to its weakest member in 2011, plunging by 60 percent, even though the company continued to make progress in the development of its Protectan anti-radiation sickness drug.
Yet the stock plunged last spring after a federal agency, which has been a significant funding source for Cleveland BioLabs, requested additional clarification of the path the company is taking to gain approval of Protectan from the U.S. Food and Drug Administration.
First Niagara Financial Group's stock also took a beating, plunging by almost 37 percent, despite its aggressive push to grow through a $1 billion deal to buy HSBC Bank's upstate branch network. But to pay for the deal, the bank had to sell $1.1 billion in additional common stock, preferred stock and debt. It also cut its dividend in half.
Columbus McKinnon's shares tumbled by almost 38 percent. The Amherst material handling equipment maker's shares lost almost half their value through the first three quarters of the year but rebounded in the fourth quarter after the company reported its strongest quarterly profits in three years.