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Buffalo Portfolio takes a beating; Of the 21 publicly traded local companies, only 4 showed gains during second quarter

Misery sure loved company among the stocks in the Buffalo Portfolio during the second quarter.

While the overall stock market sputtered, the stocks of the locally-based companies that make up the Buffalo Portfolio took a beating that was almost twice as severe.

And while the entire portfolio lost an average of 6 percent during the quarter – the worst performance by the local stocks since the third quarter of last year – what stood out was the breadth of the losses.

Only four of the 21 local stocks managed to go up during the quarter, and just two – high-flying Synacor and Evans Bancorp – turned in gains that topped 10 percent. Every other local stock – four out of every five members of the Buffalo Portfolio – went down during the quarter, with almost half losing more than 10 percent of their value. Six of the local stocks dropped by more than 20 percent, with Cleveland BioLabs and Gibraltar Industries shares taking the worst drubbing.

The beating that the local stocks suffered was worse than the 2.5 percent drop by the Dow Jones industrial average or the 3.3 percent dip by the Standard & Poor's 500 index. The local stocks underperformed the 5.1 percent slide by the Nasdaq Composite Index, and the 3.8 percent decline by the Russell 2000 index of small company stocks, which is more representative of the make-up of the Buffalo Portfolio.

The widespread losses wiped out the modest gains that the Buffalo Portfolio reaped during the first quarter, and left the local stocks down by a collective 1.4 percent at the halfway point for the year. The local stocks have dropped during three of the last five quarters.

The losses also derailed the Buffalo Portfolio's recovery from the devastating declines it experienced in 2008 and early 2009. An investor who owned a single share of each of the locally based companies started the quarter with a portfolio that was worth 4 percent more than it was at the end of September 2008. Today, it's worth slightly less than 1 percent less than it was in September 2008.

On the bright side, Synacor had a quarter to remember, with the Internet content provider's shares surging by 81 percent in just three months. Some of the jump was because of good things that happened at the company. Analysts at Needham & Co. noted that the company's profits have topped analyst expectations twice since it went public in February and raised its earnings guidance twice, as well.

But the stock also has been targeted by stock promoters who have been relentlessly hyping the shares while also attracting the attention of short-sellers. That has made it harder for long-term investors to determine how much of the gains are due to the company's improving performance, and how much is due to the increased trading from short-term investors. Needham downgraded the shares to a "hold" rating from a "buy" two weeks ago because of valuation levels.

Evans Bancorp's strengthening performance was behind the 16 percent jump in the banking company's stock. Evans' shares built off a strong first quarter when the company reported a 27 percent jump in its first-quarter profits, buoyed by double-digit growth in both core loans and deposits, coupled with fewer loan losses.

Another local banking company, Financial Institutions, eked out a 4 percent gain after reporting a 6 percent increase in its first-quarter profits and adding eight branches in a deal with First Niagara Financial Group.

On the downside, no company had a more trying quarter than Cleveland BioLabs. The Buffalo company's shares have been under pressure for the past year because of concerns about funding sources for its drug development efforts. Even encouraging results from clinical studies on two of its drugs weren't enough to pull the shares out of its slump.

Cleveland BioLabs shares lost 36 percent of their value during the quarter, even though a clinical study on nonhuman primates indicated that its Protectan anti-radiation sickness drug can greatly increase survival rates following a potentially lethal exposure to radiation. Another early stage study yielded promising results that its Curaxin drugs could be effective in treating a type of early childhood cancer when used in conjunction with two other drugs.

Gibraltar Industries shares also were battered, with its shares plunging by 32 percent after the Hamburg-based building products maker reported an 83 percent plunge in its first quarter profits that fell far short of analyst expectations. While Gibraltar has restructured its operations to significantly reduce its operating costs, the slumping housing market has continued to depress its key markets.