Rural Stocks Best Dow, S&P Over Two Years

Two years ago, the Daily Yonder began an index of rural stocks. So far, the Yonder 40 is doing better than the Dow Industrials and the S&P 500.

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Two years ago today we began tracking the rural economy through the companies that do much of their business in small towns. We picked 40 publicly-traded companies that reflected different sectors of the rural economy. We called this group the Yonder 40 and then tracked the progress of these stocks compared to broad measures, such as the Dow Industrials and the Standard and Poor’s 500.

The last two years have been miserable for the stock market, but the companies doing business in rural America are doing better than the rest.

The Yonder 40 stock index has lost 27% of its value since July 1, 2007.

The Dow Industrials — 30 of the nation’s largest corporations — have lost 37%. And the S&P 500 — a broader index of large companies — has lost 39%. The only common index that comes close to the Yonder 40’s performance has been the NASDAQ listing of smaller firms. The NADAQ has lost 29.5% in the last two years.

The three stock indices tracked until the markets began to recover in early March. At that point, the Yonder 40 rose faster than the Dow or the S&P. In 2009, the Yonder 40 is up nearly 12%. The S&P is up almost 2% and the Dow is down almost 4%.

The Yonder 40 was an experiment of sorts, so it is not exactly clear why these rural stocks are doing better than the broader stock indices. In much of mid-America, unemployment rates have been lower than in the rest of the country, especially in agricultural counties. However, rural manufacturing has been particularly harmed during the recession and unemployment in these counties is running well above the rest of the country.

Only six companies in the Yonder 40 have stock prices that are higher today than in July 2007. Walter Industries, the coal producer, is up 25% from July 1, 2007, even though it has taken a huge tumble from its highs. 

Ralcorp Holding, a food maker, is up 14%. Monsanto, the agricultural seed and chemical producer, is up 10%. DirecTV, the satellite television provider, is up 7%. Waddell & Reed, the small town stock broker, is up just over one percent. And the ever-present Wal-Mart is up a fraction over the last two years.

Every other company is down. Fairpoint Communications, the rural telephone company, is off by 97%. Regions Financial dropped with the rest of the banking industry and is off by 88% in two years. (Southwestern Bancorp is of by 59%.) Businesses in every category have been hit. Even Cabela’s, the outdoor equipment seller, is down by more than 50% even after its price has nearly doubled in the last six months.

One company went bankrupt. Recreational vehicle maker Fleetwood Enterprises was taken off the Yonder 40 last year as this industry collapsed. Some Indiana counties that were home to recreational vehicle factories have some of the highest unemployment rates in rural America.

One company that began on the Yonder 40 has been dropped from the index because its stock prices dropped so low the company was in danger of being delisted by the New York Stock Exchange. Lee Enterprises, the owner of small town newspapers, began with a stock price of nearly $21 a share in July 2007. It is now trading for considerably less than a dollar. 

One company that began on Yonder 40 list, UST Inc., the smokeless tobacco maker, was purchased for $10.3 billion by Philip Morris USA.

These three companies have been replaced by tobacco producer Universal Corp.; rural health care provider LifePoint Hospitals Inc., and road-builder Astec Industries. Below is a list of the Yonder 40 and how those stocks have fared since January 1 of this year.

Daily Yonder
This chart shows the stock price of the Yonder 40 at the end of June — and how these stocks have fared in 2009.

 

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