It was a recession that had even hardened, grizzled, experienced economists scratching their heads, caused millions worldwide to collect pink slips, and precipitated worry throughout the financial world, much as the panic over the H1N1 pandemic overtook bodies and souls all over the globe. Such was the atmosphere with which investors had to cope with in 2009.
The economic downturn – which, technically, began in the last quarter of 2007 – characterized itself by not only its length, but its depth, width and harshness. The first danger signals began appearing with the credit crunch in the summer of 2008, in which many Americans defaulted on their mortgages, finally culminating that fall in the collapse of Lehman Brothers, and with it, the near collapse of the banking system. It caused tanking of the stock markets, forcing major corporations to the brink of collapse, and the federal government to step in, issuing billions of dollars to keep these entities on their feet.
As a new administration took office in Washington in January, such was the downcast mood of many in the nation that any glimmer of optimistic news – such as a corporation declaring it had lost only a button rather than its entire shirt – was greeted with hurrahs from sea to sea. Realistically, only when sights are set higher can a recovery be said to be taking place.
(To be fair, third-quarter GDP finally showed a gain in America – by 2.8% -- the first such period of growth in six quarters, making dreams of progress more tangible.)
Not only was the erstwhile behemoth General Motors tottering (for stock purposes, it’s now known as U.S. Motors Liquidation Company, and is now a penny stock, trading around 60 cents U.S. under the symbol MTLQQ) but other car companies felt the pinch; Honda, Toyota and other offshore bigwigs laid off during the year. Microsoft sent much of its staff packing last winter, too; proof it was not immune.
And the bad news seemed to follow on itself; the unemployment rate accelerating from 7.1% in December 2008, to a peak of 10.2% this October. But as the year drew to a close, the Federal Reserve, not seeming to want to rock the boat, kept its Fed Funds rate at record-low levels at or around zero, acknowledging that the economy was far from out of the woods, but projecting that growth could gallop ahead as much as 4% in this year’s fourth quarter, the fastest rate in four years.
Finally, just as things seemed to be getting better – or at least, less gloomy – more warning buzzers sounded from a nation half a world away. The day after Thanksgiving, the Middle Eastern nation of Dubai declared it could not foot about US$10 billion in debt, a piece of news that sent markets around the globe into a tizzy, until a lifebuoy was tossed from the neighboring Arab emirate Abu Dhabi. The bailout in early December allowed Nakheel, the real estate wing of Dubai World, to repay a $4.1-billion bond that had matured the previous week.
The relief registered on Wall Street, enabling roller-coaster markets to resume their upward journey. After revisiting gulches in March they hadn’t occupied in 12 years, bigger-cap equity markets moved as much as 60% higher before the snow fell. The redoubtable Dow Jones Industrial Index dipped as low as 6,547.05; by year’s end, it had again surmounted 10,500. The S&P 500 had gone as low as 676, but had reached above 1,100 in December. The tech-heavy Nasdaq reached an abyss of 1,268 before working its way above 2,200 by Christmas.
The Russell 2000 Index, measuring the performance of small-cap stocks, mirrored its bigger cousins in collapsing in early March at the 343 mark, before recovering to a level around 630, before settling to just above 600 as Christmas approached.
Two stocks in particular stood out in 2009 for AllPennyStocks.com followers: Maryland-based GenVec Inc. (NASDAQ: GNVC, Stock Forum) and Taiwan-headquartered Himax Technologies Inc. (NASDAQ: HIMX, Stock Forum).
During 2009, GNVC distinguished itself by winning FDA designation for its lead product candidate, TNFerade. GenVec signed a contract for the development of influenza and HIV vaccines in support of the Vaccine Research Center of the National Institute of Allergy and Infectious Disease, part of the National Institutes of Health. GNVC was featured by AllPennyStocks.com back in January, when its stock price was at 41 cents, climbing out of a 52-week gully; it catapulted ahead to $1.18 in November, before settling back around 93 cents. The maximum percentage high for AllPennyStocks.com investors for GNVC would have been 188%, but if you weren’t lucky enough to get out at that price, you would still be sitting comfortably up 127%.
For its part, HIMX introduced in December its iCT (Infinity Color Technology), which enables significant power saving for TFT-LCD TVs and monitors, regardless of CCFL (Cold Cathode Fluorescent Lamp) or LED (Light-Emitting Diode) backlights, while enhancing image quality. Developed by one of the company’s subsidiaries, the innovative iCT is a unique and cost-effective approach in optimizing power efficiency and image quality.
While its bottom line saw better days in 2008, the company is confident its cutting-edge TV technology can attract enough members of the public – and enough investors – to reverse that trend. Also the subject of a January write-up on AllPennyStocks.com, HIMX tilted the stock price scale at $1.38; the price galloped ahead to $3.97 in July, before settling back by year’s end to $3.01. The maximum percentage high for AllPennyStocks.com investors for this company would have also been 188%, but if you’re timing on that stock was also off, then you would still be sitting comfortably up 118%.
Still, what the small-cap market teaches us is that there are still bargains out there, run by intrepid souls who can see past the distractions of bad economic news and focus on bringing out quality products that can draw buyers, and with it, investors ready to take a chance – all of which bodes well for an upcoming year that should show off the market’s recuperative powers.
Disclosure: The author, Peter Szafranski, has not been compensated nor does he own a position in the above mentioned companies.