The bad news for homeowners is still the good news for investors at Minneapolis-based Dolan Media.
The company’s stock has become one of the splashiest new issues to hit the market this year, thanks in part to its booming mortgage foreclosure business.
On Monday, Dolan stock closed at a new high of $28.26, up 2.8 percent for the day. Meanwhile, the overall market tanked once again. The Dow Jones Industrials fell 237 points, or 1.8 percent while the S&P 500 lost 33 points, or 1.3 percent. Today, the stock jumped again, closing at $29.66, up 4.9 percent.
That’s pretty much the way it’s gone ever since Dolan Media went public Aug. 2 at $14.50 a share. The stock’s 95 percent gain since then has been the 13th-best among 226 stocks that have gone public in the last 12 months, according to Renaissance Capital’s website.
Dolan Media puts out 60 publications serving niche audiences in legal, financial and real estate markets in 19 metropolitan areas. Seven of them circulate in the Twin Cities, including the daily Finance and Commerce newspaper in Minneapolis, the biweekly St. Paul Legal Ledger and the Minneapolis Lawyer.
The company has grown rapidly by acquiring many of these publications, then beefing them up with news content. But there’s little doubt that its role in servicing foreclosures has been powering much of the stock’s climb.
‘Mad Money’ man lends a hand
One of Dolan’s biggest gains came Oct. 3, the day after cable TV “Mad Money” showman Jim Cramer touted the stock as “one of the most interesting plays around” because it benefits from mortgage defaults.
Three weeks ago, Dolan reported that revenue rose to $38.3 million for the third quarter ended Sept. 30 from $28.8 million in the comparable year-earlier quarter. Nearly three-fourths of the increase came from the company’s professional services division, which includes its mortgage foreclosure operations.
James P. Dolan, chairman and chief executive officer, said then that the growth in that division was “primarily driven by the significant increase in mortgage default processing services. As the leading mortgage default processor in both Indiana and Michigan, we continue to benefit from the trend of rising foreclosure volumes.”
The company said an 86 percent surge in revenue from processing the foreclosures paced the division’s overall revenue gain for the quarter.
Dolan started out as a police reporter at the San Antonio Express-News, the first U.S. business acquired by media magnate Rupert Murdoch, and then spent 15 years at Murdoch’s News Corp. In 1992, he founded Dolan Media with backing from Twin Cities-based Cherry Tree Investments. Another key backer here: investor Mike Winton of Winton Partners in Minneapolis.
Only one other new IPO here doing well
Four other Minnesota-based companies have gone public over the last 12 months. None has come even close to matching Dolan Media’s performance, according to Renaissance Capital.
Of the four, only Minnetonka-based Virtual Radiologic has done well. This company sells radiology services to healthcare providers. Its stock closed at $23 on Monday, up from $17 when it went public Nov. 14.
Enteromedics, a Roseville firm that also went public Nov. 14, is trading just four cents above its offering price. The company is working on a device to prevent obesity.
Compellent, a data storage company based in Eden Prairie, surged after its initial public offering last month. But on Monday, it slipped just below its October offering price.
And U.S. BioEnergy stock has fallen 45 percent since going public last December. The company, based in Inver Grove Heights, makes ethanol.
The moral: In the stock market, it helps to have a hot story — no matter how cold the story might be for others.