The leading index of Colorado stocks has been setting a succession of record highs in recent weeks, led by media and other growth companies and the First Data corporate buyout.
As earnings growth slows for companies in various industries, those that can continue to generate strong profits will be in high demand. Among those, from Wall Street’s point of view, are some prominent Colorado companies, including satellite-television provider EchoStar, telecommunications firm Qwest Communications and restaurant chain Chipotle Mexican Grill.
“The media and growth stocks are starting to run,” said Barbara Walchli, portfolio manager of the Aquila Rocky Mountain Equity Fund.
Tuesday, the Bloomberg index of 111 public companies based in Colorado closed at 422.72, after briefly reaching a record high of 423.75 in the morning. The index has been setting records virtually every day in April.
Investors last fall started to shift away from cyclical stocks, whose fortunes are tied to the strength of the economy, to growth companies, which have struggled in the past seven years.
“You have a situation where investors see the economy slowing and it is harder to find good earnings growth,” Walchli said.
Earnings growth for the companies in the Standard & Poor’s 500, which rose at an average annual rate of 16.8 percent for the past 12 quarters, is expected to increase at an annual rate of just 3.7 percent in the first quarter, according to Deutsche Bank Alex Brown.
That estimate may prove low, but slower growth causes companies like EchoStar to look more attractive.
EchoStar stock is up 23.7 percent this year and 56.5 percent for the past 12 months. Analysts are calling for the company to generate 41 cents a share in the first quarter, compared with 33 cents in earnings per share in the first quarter of 2006, a 24 percent year-over- year increase in quarterly earnings.
Shares of Liberty spinoff Discovery Holding, owner of the Discovery Channel, are up 29.3 percent year-to-date and 44 percent in the past 12 months.
Higher energy prices are also pushing some Colorado stocks higher.
News that natural-gas companies were exploring a global consortium like OPEC to control production generated renewed interest in domestic gas producers.
Some local energy stocks – names like Cimarex Energy and Bill Barrett Corp. – have found a second wind since March.
Buyout fever, driven by private-equity firms loaded with cash, is also pushing stocks higher, said Tom Coxhead, senior vice president at RBC Dain Rauscher in Denver.
That trend hit home when electronic-payment processor First Data of Greenwood Village accepted a $29 billion buyout offer from private-equity firm Kohlberg Kravis Roberts & Co. this month.
KKR offered a 26 percent premium over what public stock investors valued the company at.
“Who would have thought two months after the market downturn in February we would be hitting new highs?” Coxhead said.
The Bloomberg Colorado Index is price-weighted, meaning higher-priced stocks have a larger impact on its movements.
Liberty Media Capital, which closed at $116.51 a share, represents 5 percent of the weighting in the index. Molson Coors Brewing, ProLogis and Chipotle also have a disproportionate impact on the index.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
