Takeover Targets and Discounters Among the Few Stocks That Rose in 2008
By Jeff Kearns and Elizabeth Stanton
Bloomberg News
Sunday, January 4, 2009
Gloom pervaded the world's stock markets last year but, if you looked hard, you could find a few bright spots.
Brewers and tobacco growers were boosted by takeovers, and discount retailers gained as consumers gravitated to lower-cost products.
Anheuser-Busch jumped 31 percent after InBev NV agreed to acquire the owner of Budweiser beer to create the world's biggest brewer. UST surged 27 percent after Altria Group offered to buy the snuff and cigar company. Fast Retailing, the operator of Japan's Uniqlo discount clothing stores, soared 63 percent. Wal-Mart Stores, the biggest retailer, and restaurant operator McDonald's were the two companies in the 30-stock Dow Jones industrial average that rose.
Only 8 percent of the 1,693 stocks in the MSCI World Index of 23 developed markets defied last year's rout, as credit markets rose after more than $1 trillion in bank losses and write-downs at the world's biggest financial companies caused the first simultaneous recessions in the United States, Europe and Japan since World War II. About 80 percent of the companies that sell consumer staples, the category that includes beer makers and chain stores, retreated.
"There were so few stocks you could get long and stay long," said John Wilson, co-director of equity strategy at Morgan Keegan & Co., which manages $120 billion in Memphis. "Even the classic defensive stocks didn't do their job."
About $30 trillion was erased from equity markets worldwide in 2008. The Standard & Poor's 500-stock index tumbled 38 percent, the most since 1937.
Tunisia was the only market out of 69 in MSCI indexes that rose. Twenty-eight national benchmarks lost more than half their value, led by the 67 percent drop in Russia's Micex Index, a 66 percent retreat in China's CSI 300 Index and a 52 percent decrease in India's Sensex Index. The U.K.'s FTSE 100 Index posted the smallest decrease among the world's 20 biggest markets, slumping 31 percent.
The MSCI World Consumer Staples Index fell 25 percent, even with gains by Anheuser-Busch, UST and discount retailers.
Anheuser-Busch stopped trading on Nov. 17 at $68.58 after the takeover by InBev was finalized, finishing up from $52.34 at the end of 2007. The merger created a brewer with more than 200 brands including Bud, Stella Artois and Beck's.
UST closed at a record high of $69.38 on Dec. 31, boosted by Altria's $69.50-a-share offer. UST reported third-quarter profit in October that fell less than analysts estimated as promotions helped sales of its top-selling Copenhagen and Skoal brands.
Discount stores increased on speculation that consumers will seek out bargains as economies slow around the world. Fast Retailing, based in Japan's Yamaguchi prefecture, said November sales at Uniqlo stores open at least 12 months jumped a record 32 percent.
Wal-Mart's same-store sales climbed 3.4 percent in November and may have risen almost 3 percent in December, according to the company. McDonald's, the world's largest restaurant company, said global sales expanded 7.7 percent in November after promotions of $1 double cheeseburgers and coffee.
Wal-Mart shares gained 18 percent in 2008, while McDonald's rose 5.6 percent.
"People are going to cut back where it's easier to cut," said Jeffrey Schappe, who helps manage $16 billion as chief investment officer at BB&T Asset Management in Raleigh, N.C. "But they still have to buy groceries and clothing, and with clothing they'll buy clothes that are less trendy and more of a value."
A short squeeze, or rally caused by investors closing out bearish bets, made Volkswagen AG the only stock in Germany's DAX Index to gain.
The automaker, which briefly overtook Exxon Mobil in October to become the world's largest company by market value, surged 60 percent as Porsche SE announced plans to boost its stake to 75 percent. That forced short sellers to buy stock to replace the borrowed shares they sold.
"Volkswagen was a real standout moment for us," said Martin Slaney, head of derivatives trading at GFT Global Markets in London. "For a while it was our most-traded security."
In the United States, 62 out of the 68 level 3 industry groups in the S&P 500 declined in 2008.
"It was basically an environment of indiscriminate selling," said Mark Freeman, a Dallas-based money manager at Westwood Management, which oversees $7.5 billion including shares of Wal-Mart and McDonald's. "What people were looking for was stability. They were also looking for some visibility and clarity from an earnings standpoint."
Adam Haigh in London contributed to this report.
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