The Pelican State Portfolio, a group of Louisiana stocks tracked by The Advocate, outperformed the market for the first time since the second quarter of 2015.
The 23 Louisiana-based publicly traded companies that make up the portfolio were up 7.1 percent for the third quarter. In contrast, the Russell 2000, which follows small-cap stocks that have an average market capitalization of $1.3 billion, was up by 5.3 percent during the quarter. The Dow Jones industrial average, an index of 30 top businesses, rose by 4.7 percent during the three-month period. And the S&P 500, which tracks 500 large companies, was up 3.6 percent.
The Louisiana stock rebound resulted from signs that the oil and gas industry has finally hit rock bottom after a sustained run of low prices. Year-to-year job losses in Lafayette, an area where the economy is heavily dependent on the oil and gas industry, have started to taper off.
Five of the state’s nine metro areas added jobs for the 12 months ending in August, with the…
“All the oil stocks are up,” said Peter Ricchiuti, a finance professor at Tulane University who tracks regional stocks across the South through the university’s Burkenroad Reports. “On some very positive preliminary findings, the market has rallied.”
Stone Energy, the Lafayette-based oil and gas production company, was the big winner in the quarter, with its stock price going up by 58 percent. The company recently wrapped up a prepackaged bankruptcy plan, so it was aided by easy comparisons. In August 2014, Stone was trading at about $2,000 a share. Since then, the company pulled off a reverse 10-to-1 stock split to drive the price up and keep from being booted off trading on the New York Stock Exchange.
“They just hunkered down,” Ricchiuti said.
Another big winner was H&E Equipment, the Baton Rouge company that sells and rents heavy equipment. The company’s stock was up more than 50 percent for the quarter.
A couple of factors boosted H&E, Ricchiuti said. President Donald Trump has talked about making massive infrastructure investments, which would provide a boost for the business because its heavy equipment would play a crucial role in the building of roads, bridges and ports.
The second is the company’s attempt to buy Neff Corp. during the quarter. “That’s where a lot of that run comes from,” he said. H&E’s stock price dropped earlier in the quarter because investors felt that some of the cost savings that were hoped for as a result of the acquisition wouldn’t pan out.
After being outbid for Neff Corp., Baton Rouge-based H&E Equipment Services Inc. said We…
In August, Neff backed out of the deal to take a better offer from United Rentals. Neff had to pay a $13.2 million termination fee to H&E. So not only did H&E get out of a deal that investors didn’t like, but it walked off with cash, Ricchiuti said.
Although the portfolio outperformed the market in the third quarter, for the 12-month period ending Sept. 30, it fell far below what the major indexes did. The Pelican State Portfolio was up 10.2 percent for the 12-month period, but the Dow industrials increased by 22.4 percent during the same time, the Russell 2000 was up by 19.1 percent and the S&P had a 16.2 percent jump.
Globalstar was the biggest loser during the quarter. Shares of the Covington-based satellite phone provider were down by 23.5 percent.
The Motley Fool said one of the factors that drove the share price down was the company’s filing to the Federal Communications Commission that a potential new wireless network for air-traffic control systems is close to the spectrum set aside for Globalstar and even overlaps it. This could reduce the company’s future cash flows.
Ricchiuti said the company is trying to find a company to partner with in developing a wireless network on a spectrum it owns that would allow people to connect directly to the internet.
“It’s such a speculative stock” he said. “Some people say it’s worth nothing. Others say it should be trading at $10 to $12 a share.”
SEACOR Marine Holdings was another big loser, dropping 23 percent during the quarter. The oil and gas service company just went public in July, when International Shipholding Corp. emerged from bankruptcy as part of a spinoff from SEACOR Holdings.
Spin-off companies can go one of two ways, Ricchiuti said. Sometimes they’re a way for managers who got lost in a big business to get some independence and a chance to run things in their own way. Other times, they’re a way for a company to jettison some weak links and improve its bottom line.
But one thing SEACOR has going for it is its leadership. Ricchuiti notes that SEACOR is run by Charles Fabrikant, who he dubbed “the smartest guy in the financial world. It’s hard not to bet on him” he said.
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