Which Minnesota companies' stock performed the best last year might surprise you

Investors call the big-tech companies that led the national market rallies the "Magnificent Seven." You could call the best-performing Minnesota stocks the "Fantastic Four."

These four stocks, each of which had a better than 70% total return in 2023, were a wider mix of companies than the national standouts. Hawkins Inc. is a chemical company; APi Group is a life safety, security and services provider; Winmark Corp., a specialty retailer; and CVRx a medical device company.

Hawkins, with an 85% return, had the best stock performance among Minnesota companies last year.

An increasing focus on clean water has buoyed Roseville-based Hawkins' water-treatment segment. The company made three acquisitions to expand the unit and now sells chemicals that treat an estimated 5.2 trillion gallons of water every year at 51 facilities in 25 states, according to the company's most recent report documenting environmental, social and governmental (ESG) efforts.

Strong cash flow in 2023 also allowed the company to pay down long-term debt.

Hawkins also had a total return of 180% over the past three years, second in Minnesota only to Northern Oil and Gas' total return of 358% during that period.

Just behind Hawkins was New Brighton-based APi Group with a total return of 84%. It also expanded through acquisition, including a $3.1 billion deal for Chubb Fire & Security in January 2022 that nearly doubled the size of the company.

Winmark, the franchiser of resale concepts including Play it Again Sports and Plato's Closet, had a return of 83%. The company has sold its investors on how quality resale is a boon when inflation is high.

The fourth standout in Minnesota was CVRx, which is developing a treatment for heart failure using neuromodulation. It had been trading down through most of 2023 but used a strong rally to finish the year with a total return of 71%.

The Brooklyn Park-based company received critical new Food and Drug Administration approvals for its Barostim treatment on Dec. 26. The new approvals allow CVRx to increase its total addressable market by about 60%.

Good news for investors is that the stock market performance is expected to broaden out this year. In other words the Magnificent Seven, the large technology companies that carried the overall market in 2023, might not be as magnificent in 2024. According to Craig Johnson, the chief market technician for Piper Sandler in Minneapolis, the market started to broaden out in mid-October.

Johnson said that since mid-October small-cap and mid-cap stocks have outperformed the Magnificent Seven and he expects broadening market trends to continue into the new year.

"I think the Mag Seven is going to be the Lag Seven in 2024," Johnson said.

Minnesota doesn't have huge tech companies so broader market participation is good news for the state's large base of industrial companies. Those stocks did well in 2023 and stand to next year as well.

The long-term outlook for industrial stocks looks good with increased infrastructure spending in the U.S. and the continued trend of reshoring and nearshoring of industrial manufacturing.

Minnesota manufacturers like Fastenal, nVent Electric, Pentair, Protolabs and Tennant were top-tier performers, each with a better than 40% total returns for 2023.

"Every one of those names are a continuation of the reshoring trend. And that is a trend that's going to be decades long. Not a one-year wonder," Johnson said.

2023 was a rare year in which Minnesota's largest public company and annually among its best performers, UnitedHealth Group, underperformed the broad S&P 500 index. The company's total return in 2023 was up less than 1% compared with the S&P 500's 24% gain.

UnitedHealth's performance tracked with the broader health care sector, which underperformed the overall market. The health care sector as a whole rose only 2.6%.

"Stocks can underperform, they can lag an index, despite some very good fundamentals," said Lauri Brunner, a senior portfolio manager at Minneapolis-based Thrivent. According to Brunner that's what happened to UnitedHealth's stock.

Brunner said that as people settle into post-pandemic life, they have resumed more normal visits to doctor's offices and clinics and scheduled more elective procedures. That increased medical loss ratios and created an added headwind for managed-care companies.

"That can be something that some investors say I'm going to try to avoid for a year. And I would rather invest in a period where I believe medical loss ratios won't be facing an uphill battle," Brunner said.

Minnesota's two large-cap retailers, Target Corp. and Best Buy Co. Inc., also were laggards, with Target losing 1.4% of share value for the year and Best Buy only adding 2.5%.

Two struggling firms were Minnesota's worst-performing companies in terms of share value.

Foxo Technologies, the Minneapolis-based life insurance company that has been beset with problems since it became public in September 2022, lost 92% of its value.

Bright Health Group, which needed a 1-for-80 reverse stock split earlier this year to avoid being delisted from the New York Stock Exchange, saw its stock price go down 85% in value.