If you invested heavily in Illinois companies that provide consulting services, you had little reason to celebrate in 2012.
While the Standard & Poor's 500 index ended the year up 13 percent, most large businesses in the region that counsel other companies on how to improve their operations saw their stock prices drop.
Business support services was one of the few sectors getting clobbered in a 2012 Tribune ranking of Illinois and northwest Indiana stocks' performance.
Stock prices gained at about 70 percent of the 127 companies on the list, and about half outperformed the S&P 500. Bank owners such as Taylor Capital Group emerged from their 2011 doldrums, and Ulta Salon Cosmetics & Fragrance Inc. and Discover Financial Services marked their second consecutive year of soaring stock prices.
The year's biggest decliner, down 76 percent, was Groupon, as once-torrid revenue growth at the daily deals offerer started slowing.
Career Education was the second-worst performer; its stock fell 56 percent. The highly scrutinized for-profit school chain said it would close campuses and cut jobs amid sinking revenue and financial losses.
Sectors boosted by broad gains in 2012 included electrical parts and equipment, industrial machinery, and specialty chemicals.
Of seven Illinois banks on the list, all but one outperformed the S&P 500, with price appreciation of those six ranging from 16 to 86 percent.
In contrast, stocks of four of five professional services firms — Navigant Consulting, Huron Consulting Group, Heidrick & Struggles International and R.R. Donnelley & Sons — closed down 2 to 38 percent.
Each had its own set of issues.
Navigant's services, for example, include advising companies that face disputes, litigation and investigations, including government probes, as well as businesses that need help valuing potential mergers and acquisitions.
"You see fewer government investigations during an election year, as regulators are leaving their jobs, and they don't want to start new ones," said Tobey Sommer, a SunTrust Robinson Humphrey analyst. "Also, worries about the 'fiscal cliff' slowed M&A because CEOs didn't want to look foolish acquiring a company in September ahead of the fiscal cliff when they might have been able to buy it for 20 percent less in January had we gone off."
Meanwhile, Heidrick's troubles included a slowing market for executive searches. In early 2012, analysts expected Heidrick's annual earnings to be in the range of about $1.30 per share. It appears that it will earn closer to 57 cents a share.
Huron's earnings estimates during 2012 were also trimmed, to about $2.10 from about $2.40 a share as the timing of fee payments to its health care consulting business proved volatile.
"Its underlying demand is strong," but an increasing number of clients had signed contracts where a larger portion of revenue was contingent on the outcome of Huron's consulting work, said Randle Reece, analyst with Avondale Partners LLC. That made it harder for the company and the analysts who cover it to predict the timing of revenues, since they are deferred.
For investors interested in "Dumpster diving," Morningstar Inc. considers Exelon, WMS Industries and Caterpillar to be high quality yet undervalued this year, said Heather Brilliant, chief equities strategist.
Navigant is among the region's beaten-down stocks liked by stock research firm EVA Dimensions LLC. "Its fundamentals are improving, and it's really cheap," said EVA analyst Andrew Zamfotis.
Best of the best
Here are the top three stock gainers of 2012:
2012 stock report: Pains and gains
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