When it comes to the stock market, investing in familiar companies sometimes can be a good strategy.
And that game plan certainly would have given Utah investors an edge during 2012 had they taken positions in many of the stocks in The Salt Lake Tribune/Bloomberg Index. It measures the share price performance of the 27 largest publicly held companies in the state, and it posted a spectacular 29 percent gain for the year.
By way of comparison, the Dow Jones industrial average rose 7 percent in 2012, while the Standard & Poor’s 500 index gained 13 percent.
Unlike the Dow and the S&P 500, the Utah index is made up primarily of small-cap companies. Such corporations have a market capitalization — a figure calculated by multiplying the number of shares a company has outstanding by its stock price — of $1 billion or less.
It’s that small-cap component that helped the Utah stock index stage its spectacular run in 2012.
“Overall, small-cap stocks were the asset class that led the market in 2012,” said David Russon, president and CEO of Investment Management Consultants in Salt Lake City. He pointed out that the Russell 2000 index, which tracks small-cap company performance, was up more than 14 percent in 2012.
Russon noted, however, that historically the highest-performing asset class in any given year will often move to the bottom of performers in the following years. “It doesn’t pay to chase (asset-class) performance,” he said. “What does well one year doesn’t necessarily predict performance.”
That may also be true of the Utah index in 2013. Two of the top-performing Utah companies in 2012 will be out of the picture and won’t contribute to the index in the year ahead.
Schiff Nutrition, which was Utah’s second-best performing stock, saw its shares soar 293 percent last year — the result of it being acquired by the British consumer goods company Reckitt Benchiser Group for $42 a share. And Ancestry.com, Utah’s ninth-best performer, experienced a similar fate. Its shares gained 40 percent in 2012, when it was purchased by Permira Holdings, a U.K. private equity firm, for $32.05 a share.
Utah’s best-performing stock in 2012 was Security National Financial Corp., whose shares rose a whopping 466 percent.
The Salt Lake City-based business conglomerate operates in three areas —life insurance, mortgage banking and mortuary operations — all of which had strong performances.
In mid-November, Security National reported that its third-quarter revenue reached $63.7 million, a 54 percent increase from the previous year, while its pre-tax earnings increased 634 percent, from $835,000 in 2011 to $6.1 million for its most recent quarter. Net income for the third quarter reached 42 per share, compared with 8 cents per share in the same period a year earlier.
Overall, only seven of the 27 companies that make up the Tribune/Bloomberg Index saw their share prices decline in value last year.
Among the worst-performing was Nu Skin Corp., a Utah-based multilevel marketing company that sells nutritional products. Its shares declined 24 percent.
In mid-December, Height Securities analyst Jarrel Price noted in a report there has been increasing concern in recent months that multilevel marketing companies may face heightened scrutiny at state, federal and international levels. And he noted that China might soon determine whether Nu Skin “is operating as an illegal MLM in that country.”