Big bull market birthday good to Michigan stocks

Many Michigan investors could be celebrating the big bull market birthday Monday. That's if they were brave enough or flush enough to invest in some then-beleaguered Michigan stocks, such as TRW, La-Z-Boy or Ford Motor, back in the depths of economic despair on March 9, 2009.

It's a pretty big if.

The trouble is, if you remember what it was like six years ago here, many people lost overtime hours at work, lost jobs, lost homes and definitely lost hope.

"You can't invest in your 401(k) if you don't have one, if you don't have a job with a 401(k)," said Daniel Culloton, associate director of equity manager research for Morningstar in Chicago.

"You have a lot of people out there that missed the early stages of a strong rally."

The sanity of any prognosticator would have come into question in 2009 if someone had forecast that the Dow Jones Industrial Average would hit above 18,000 in six years.

Or imagine if you heard someone predict that new annual auto and light truck sales to be in the 16 million to 17 million range within six years. Or if you heard a forecast that Ford, then trading at less than $2 a share, would plan to roll out the Ford GT with a price tag of $400,000 in 2016.

Instead, no one flinched six years ago when some pundits predicted that the Dow would fall further after hitting 6,547.05 points on March 9, 2009.

But March 9, 2009, turned out to be the low point and the slow start of a new bull market.

The best time to invest was exactly when nobody wanted to invest after the brutal financial collapse.

Michigan companies that saw incredible gains based on Morningstar's research included TRW, which posted an annualized return of 100% between March 9, 2009, and March 3, 2015. TRW Automotive Holdings was trading around $104 a share last week. It had closed around $1.50 a share on March 9, 2009.

Based on Morningstar research, American Axle showed an annualized gain of 99.98% during that time, while La-Z-Boy had an annualized gain of 87.69%.

During the same time, Domino's had an annualized gain of 64% and Ford had an annualized gain of 47.83%, according to Morningstar's research.

Everything was not a sure bet, of course.

Buying the old General Motors stock at around $1.85 a share in early March 2009 would have been a mistake. The old shares ended up worth nothing when GM went into bankruptcy.

Some companies remained in business but still saw big drops in stock prices going forward, too.

Flagstar Bancorp lost an annualized 21.5% from March 9, 2009, through March 3, 2015, based on Morningstar research.

Some market watchers say the real surprise was how quickly consumers did resume their spending, given the severity of the recession. So retailers, restaurants and makers of big-ticket consumer goods rebounded much more quickly than many expected.

Back when things looked extremely bleak, some forecast that consumers would not shop or remodel their homes or travel like they did before the 2008-09 crash.

"I think the biggest surprise was that March 9 proved to be a market bottom. Many pundits, Bill Gross included, were suggesting to investors at that time that the equity markets were going much lower," said Robert Bilkie, president of Sigma Investment Counselors in Southfield.

The stocks that did the best were the ones that got hurt badly but did not go bankrupt.

Bilkie noted that a company had to be strong enough to weather the financial storm, and be able to survive, to benefit from that rebound.

He said the crisis reads like a textbook in retrospect for why investors need patience and courage.

"You have to make sure you can withstand financial pain for a longer period than you may have originally anticipated," Bilkie said.

Kevin Yousif, chief investment officer for LS Investment Advisors in Bloomfield Hills, noted that during the past six years, the Dow Jones Industrial Average posted a return of 20.1% per year.

"A lot of people are kicking themselves for missing this last rally," Yousif said.

But the worst way to celebrate the big bull market birthday would be to blindly chase the last rally.

Economists still see good news ahead, such as continued growth in the jobs recovery. Some expect further wage gains ahead, too.

But analysts, such as Yousif, are preaching caution regarding stocks going forward for many reasons. A big driver of the stock market rally — the Federal Reserve's push to lower interest rates — is about to reverse course.

"I particularly worry about the Federal Reserve's plans to raise rates as that will add uncertainty to a market that prefers certitude," Yousif said.

Uncertainty is never a friend of the stock market. But then again, not many would have predicted that we'd see a bull market with this many candles.

Contact Susan Tompor: 313-222-8876 or stompor@freepress.com