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Published: 1/7/2003

Market capitalization abstract; share price isn't

American investors are painfully aware that the bear market is nearing its third birthday.

The Dow Jones industrial average peaked in January, 2000, and two other major averages - the Nasdaq composite and the Standard & Poor's 500-stock index - hit their all-time highs two months later.

It was mostly downhill for the next 21/2 years, until the market bottomed out in October, 2002. Or at least investors are hoping that was the bottom.

In any case, some large Toledo-area corporations have been in a bear market far longer than Wall Street has.

Stocks of two of the seven Fortune 1,000 companies in the region peaked in 1999, a year ahead of the market as a whole. Three others hit record highs in 1998, one topped out in 1997, and one had its best year in 1993.

Nationally, the unusually long bear market took an estimated $7 trillion out of stock values.

Northwest Ohio and southeast Michigan corporations did their share to contribute to the debacle: Collectively, the seven largest area firms had market capitalization of nearly $30 billion at their peaks (market cap is the number of outstanding shares multiplied by the stock price).

But at the October, 2002, bottom, the seven were valued at $7.3 billion - a mere fourth of the former value.

But the bright side is the regional companies have taken advantage of the bear market to buy back millions of their own shares - at bargain prices, of course.

Several have taken cost-cutting measures that would have been unpopular in the go-go days of the 1990s.

Now, however, investors are looking toward the future and appreciate serious medicine.

Hopefully, most of the area-based companies - big and small - will be positioned to benefit from a rising market.

Three Toledo-based Fortune 500 companies suffered the most among the large firms in the region.

Dana Corp.'s market capitalization was about $10 billion when its stock hit $61.50 in 1998, but only $1.4 billion on Oct. 9, when all the major indexes got whacked. On that day, Dana's stock sank to $9.28 a share.

Similarly, Owens-Illinois, Inc., was valued at more than $7.3 billion in those heady days in 1998, when its stock cracked the $49 level. On Oct. 9, it fell to $10.01 (and traded below that for part of last year), and its market cap fell to $1.1 billion.

Owens Corning's stock is a basket case , not because of the bear market so much as its Chapter 11 bankruptcy and the uncertainty over its stock ownership once the asbestos claimants take control of the firm. At one point in 1997, OC's market cap was nearly $2.7 billion, when its stock price was $49.88 a share.

But by early October of last year, its market cap was just $55.4 million, with the stock at $1 a share. Since then, OC was de-listed from the New York Stock Exchange, and its shares trading on the Over the Counter Bulletin Board system have fallen to less than 50 cents.

OC's market cap is now 98 percent below its peak.

Faring relatively better were Tecumseh Products Co. and Manor Care, Inc., each of which lost about half of market cap.

By last October, Tecumseh's stock value had fallen 46 percent to $713 million, and Manor Care's was down 50 percent to $1.9 billion.

Cooper Tire & Rubber Co.'s market valuation , at just over $1 billion in October, is about a third of its market cap in 1993, the last time its stock was selling for nearly $40 a share.

The best-performing area company during the bear market is La-Z-Boy, Inc., whose market cap was down just 7 percent, to $1.2 billion.

However, that's a bit illusory, because La-Z-Boy issued 9 million shares to fund an acquisition, and that artificially inflated its market value. But even discounting the extra shares, La-Z-Boy's stock lost just 17 percent in value from peak to trough.

In the last three years, area companies have spent about $1.5 billion buying their shares back - including buybacks by Dana, O-I, Cooper Tire, Manor Care, La-Z-Boy, and Tecumseh Products.

Shareholders should eventually reap some of the rewards of that strategy, as fewer shares make each investor's stake relatively more important (especially good for stocks paying dividends).

Market cap by itself means little or nothing, unless a company is a takeover target.

On the other hand, share price means a lot to all investors.



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