Manitowoc Company rode trends to big gains

They led all publicly owned state stocks over past 5 years

By Avrum D. Lank, Milwaukee Journal Sentinel

The economy is slowing, maybe even to recession levels. But for investors smart enough to understand and bet upon underlying trends, the last five years provided ample opportunity to cash in on Wisconsin stocks.
And following those trends could point the way to handsome capital gains in the next five years.

Investors in large Wisconsin manufacturing companies prospered in the five-year period ended March 31.

During that time, companies that played to the state's traditional strengths in shaping metal and other raw materials topped the list of gainers among public companies in Badgerland, according to data compiled by Bloomberg News.

Of the five winners, four - Milwaukee's Joy Global Inc. (JOYG), the Manitowoc Co. (MTW), Ladish Co. Inc. (LDSH) of Cudahy, and Twin Disc Inc. (TWIN) of Racine - are worldwide organizations. That is no coincidence, said Brian Jacobsen, professor of economics at Wisconsin Lutheran College in Wauwatosa and a senior investment analyst for Wells Fargo Fund Management in Menomonee Falls.

"They are the major exporters," Jacobsen said, and as such, they take advantage of a world economy that for the most part is doing much better than that in the U.S.

Sales of the mining equipment made by Joy Global, and its competitor, Bucyrus International Inc. (BUCY) of South Milwaukee, has been enormous around the world as demand for raw materials has skyrocketed in the past five years, especially in developing markets such as China and India, said John Collopy, director of research for Brigg-Ficks Securities LLC in Milwaukee.

Bucyrus was not on the five-year list because technically it has not been a company that long. While equipment has been made under its name for more than a century, the firm itself reorganized several times and its present legal incarnation is less than 5 years old. However, Bucyrus did make the list of best state investments for the three-year period ending March 31, displacing Twin Disc. The rest of the list remained the same.

Manitowoc, which makes cranes, is benefiting from the boom in infrastructure construction overseas, especially in the Middle East, said Collopy. Ladish makes parts for airplanes and recently opened a factory in Europe, while Twin Disc makes power transmission equipment and has also recently expanded across the Atlantic.

The last member of the five-year winners list, Badger Meter Inc. (BMI) of Brown Deer, does not do much exporting, but it, too, has benefited from ongoing economic change, Collopy said.

The company makes water metering equipment and, for the past three years, many on Wall Street have become convinced there is money to be made long-term in the world's growing demand for clean water, he said.

Because of its business, Badger Meter is seen as one of the few public stocks that is a "pure play" on water, Collopy said, helping its price.

Looking at March alone, only Badger Meter was among the five long-term winners among the best investments in the state, and Twin Disc was even among the five largest losers for the month. Thinking about that change could be profitable in the next five years, according to several professionals.

Since January, "we are starting to see an underlying market rotation" away from manufacturing stocks, said Ignatius Smetek, president of Arcataur Capital Management Inc. in Milwaukee. That has reduced demand for stocks such as Joy Global.

In addition, for much of 2007, the exporters benefited from a falling U.S. dollar, he said. As the greenback became less valuable against the euro and other foreign currencies, U.S. exporters had a distinct price advantage overseas.

In recent weeks, however, the dollar has shown signs of stabilizing and might even gain value if Federal Reserve policy-makers decide to stop cutting interest rates, or maybe even to increase them. That is a possibility as concerns about inflation grow.

Exporting, however, will remain a strength of the Wisconsin economy, said Jacobsen, and these five firms should benefit from it.

"Those companies are going to continue to do well," Collopy said.

Jacobsen agrees: "Export oriented - that is going to be the secret to the success of the Wisconsin economy," he said.

Seen in that light, the recent relative decline in price among the five-year winners "does create a good buying opportunity," he said.

Source: Bloomberg News

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