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Originally published Sunday, June 16, 2013 at 6:32 PM

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Small caps lead the charge in unlikely bull market

One lesson from the 2012 Best of the Northwest rankings is the enduring power of smaller, nimble companies.

Special to The Seattle Times

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I want you to meet me to talk business. More about that later.

One lesson from the 2012 Best of the Northwest rankings is the enduring power of smaller, nimble companies.

Among the top 10 companies, we find Barrett Business Services, Cray, Jewett-Cameron Trading, Cascade Microtech, Coinstar, Bluecora and Anchor Bancorp.

Each in its own way found a way to navigate a slow recovery and prosper. Barrett’s showing, for example, attests to the rising use of outside staffing, human resources and other business services.

It took more than that, of course: spry management that sidestepped the worst of the recession and a determination to grow rather than let the company be sold. The result has been a skyrocketing stock that has attracted the attention of hedge funds.

The list is ever-changing based on how companies meet a variety of metrics. For 2011, the No. 1 company was Alaska Air Group. This time, Alaska came in at No. 12, behind Costco and Amazon.com. These giants still turned in strong showings.

Meanwhile, Microsoft critics and worriers will find ammunition. The company fell from 16 in 2011 to 41 in this year’s rankings. Its stock-appreciation rank was 67th. On the other hand, it was No. 12 in return on invested capital, a key measure of efficiency. And Microsoft shares have made robust gains in 2013. Stay tuned for next year’s list.

Last year turned out very differently than some observers had feared. Instead of contagion from the eurozone crisis and a stall speed in growth even leading to a double-dip, the United States was among the world’s strongest economies. A steady pulse of stimulus from the Federal Reserve helped.

Although growth in gross domestic product remained weak and joblessness high, public companies enjoyed a bull market. The Dow Jones industrial average stood around 12,300 in January and began a steady climb that took it above 15,000 this spring. Among Northwest companies, small-cap stocks did very well.

The housing market began a slow but real recovery, a help to timber-dependent regions like the Northwest. It didn’t trickle through soon enough to help Seattle’s Plum Creek Timber, which held at No. 73, Spokane’s Potlatch little changed at 55 or Weyerhaeuser, which rose to 75 from 77. Next year’s Best of the Northwest should show improvement.

World trade was weak in 2012, even though Washington state exports grew bolstered by Boeing and agriculture. With parts of the eurozone in recession and Asian demand uneven, companies struggled to wring profits from international operations.

American consumers were still paying off debt in 2012. And losing so much household wealth during the downturn, they were unsteady partners. Thus, it’s not surprising that Nordstrom fell to 33 from 3 in 2011, Nike dropped to 50 from 11, and Starbucks tumbled to 44 from 6.

On the other hand, Costco wasn’t the only star depending on direct consumer spending. Columbia Sportswear of Portland vaulted to 15 from 68.

The list continues to attest to the depth and breadth of the Northwest’s publicly held companies. Each one has its own unique story.

This year, the Seattle Metropolitan Chamber of Commerce and The Seattle Times are holding a “View From the C-Suite” luncheon and panel discussion. It starts at noon, June 27, at the Seattle Westin.

I’ll be moderating a panel with the chief executives from three companies that have consistently turned in strong results: Peter Rose, of Expeditors, William Ruckelshaus, of Blucora, and Peter Ungaro, of Cray.

It will be a discussion on what it takes for companies to be successful in today’s economy and what business challenges and issues we face in the region. Questions will be welcomed.

Check it out. I hope you can join us.

You may reach Jon Talton at jtalton@seattletimes.com

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About Jon Talton

Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest
jtalton@seattletimes.com

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