19 companies hurt by bear market regain large-cap status

Updated 14m ago
By Matt Krantz, USA TODAY

Don't call them small fries anymore.

Thanks to the big run-up since the March bear market low, 19 companies that had seen their market values shrink below $1 billion – qualifying them as small-capitalization stocks – now are back among the nation's elite companies as big caps valued at $3 billion or more, according to a USA TODAY analysis of data from Capital IQ.

The fact these companies have dusted off part of the recession's soot is comfort for investors who hope the market's rebound to 14-month highs will last, analysts say. "It's important small-cap companies outperform; otherwise, it's hard for me to believe it's the start of a new bull market," says Hugh Johnson of Johnson Illington Advisors. Companies regaining big-cap status have:

•Proved themselves in the downturn. After the rally in battered bank stocks, Fifth Third Bancorp posted the biggest small-to-large cap shift.

In March, investors were suspicious of all banks' viability, says Doug Christopher of Crowell Weedon, but now they realize many will survive, thanks to improving business and more lenient accounting rules. Same for insurers such as Genworth Financial. After dumping shares of many insurers, investors now realize why the industry's strong cash flow is such an attractive long-term investment, he says.

•Moved quickly to ease their cash crunch when the credit markets healed. Investors are pleased Hertz refinanced part of its $4 billion in debt tied to financing its fleet of rental cars, says Christopher Agnew of MKM Partners. Raising $1.2 billion in October eased worries that Hertz would face intense financial stress. Likewise, MGM Mirage pushed back much of the debt maturing this year to 2010 and 2011, says David Bain of Sterne Agee.

•Stayed globally focused. With the U.S. economy growing more slowly than Asia and Latin America, investors see companies such as Tupperware, which gets more than half its revenue from emerging nations, as a play on growth, says Doug Lane of Jefferies.

•Tapped new markets or products. Human Genome Sciences is testing a promising drug for lupus, a disease that's long stumped researchers, says Joe Schwartz of Leerink Swann, and it's the kind of reborn large-cap stock that may continue to lead. "Every other investor thought the stock was hopeless when (it) was on its knees."

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