Five Stocks Shine in Dreary Year

If someone had said at the start of the year that a craft store, a fax-machine vendor and a laundry-service provider would see their shares skyrocket, you'd have laughed. All the way to the bank, that is.

AngelicaAGL and ImagisticsIGI may not be household names, and JoAnn Stores JASA isn't the kind of company you'd typically associate with strong growth, but all three stocks posted dramatic gains in 2002 while the S&P 500 fell almost 21%.

Somewhat less obscure but no less impressive are HalliburtonHAL and Providian FinancialPVN, both of which defied analysts' expectations by climbing more than 50% this year.

How did these five stocks manage to beat the odds in 2002? Some benefited from a shift in trends. But all found ways to turn their business models around.

Crafting a Recovery

Back in January of 2001, fabric and craft retailer JoAnn Stores was trading at an 11 1/2-year low, having been repeatedly beaten down during the Internet craze. But as the mood on Wall Street began to turn, shares of JoAnn did too, and after a modest 6% rise last year, the stock jumped a whopping 238% in 2002.

Blah Businesses, Sexy Gains Many stocks tumbled this year, but not these
Stock	Current Price	52 Week High/Low	Year-to-date Return
Angelica (AGL:NYSE)	23.00	10.00 - 24.31	121%
Imagistics (IGI:NYSE)	19.05	11.48 - 21.85	55
JoAnn Stores (JASA:NYSE)	25.50	6.95 - 33.98	238
Halliburton (HAL:NYSE)	19.33	8.60 - 23.00	52
Providian Financial (PVN:NYSE)	6.60	2.50 - 8.49	78
Source: Yahoo Finance

"Over the last few years anything in the crafts and fabrics was considered a stodgy business," said Laura Richardson, an analyst at Adams, Harkness & Hill. "JoAnn has benefited from an improved image for its industry and also a lot of smart moves that it has made to improve its operations." (Adams, Harkness & Hill has no banking relationship with JoAnn.)

The company closed a number of underperforming stores, implemented new systems to improve efficiencies, and took better control of its inventory this year, Richardson said. The firm has also benefited from a housing boom, which has lifted demand for home accessories.

With the stock up so sharply, some investors may be worried about jumping in, but Richardson believes there's still some potential upside. JoAnn class A shares trade at a price/earnings ratio of just 12.5 times 2002 earnings, while the class B shares, which are less liquid and have no voting rights, trade at just 10 times this year's earnings. "Compared to most other retailers or the broader market, it's still a cheap stock on a P/E basis," she said.

Another standout performer this year has been Angelica, which provides textile rental and laundry services for health care companies. Like JoAnn, Angelica was punished during the technology boom, falling almost 70% from 1998 to 2000. But shares began to recover in 2001, paving the way for a 121% surge this year.

Thomas Lewis, an analyst at C.L. King & Associates, said the firm discontinued its core business of manufacturing and marketing textiles back in January, enabling it to pay down much of its high-interest debt and significantly improve its balance sheet.