Rural Stocks Make the Big Comeback

Rural stocks get back to pre-recession prices while Dow Jones Industrials and Standard and Poor's 500 continue to lag.

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We’re back to square one.

Only July 1, 2007, we introduced the Daily Yonder 40, an index of 40 stocks picked to reflect the rural economy. We thought it might be interesting to see how a list of rural-based firms fared against other major stock indices, such as the Dow Industrials and the Standard and Poor 500.

As the country fell into recession, beginning in December 2007, our 40 companies found their stocks dropping. By the first week of March 2009, the value of the 40 stocks in the Yonder index had dropped by 50 percent.

This past week, the DY 40 index got back to where it was when it started. Nearly three years after it began, the Yonder 40 is back to even, a value it last reached in June 2008.

The Dow and the S&P 500 aren’t even close.

On July 1, 2007, we introduced the DY 40, publicly traded stocks that did much of their business in rural America. We included Wal-Mart and the company that owned the Grand Ole Opry (Gaylord Entertainment). We included a rural newspaper company (Lee Enterprises), a rural telephone company (FairPoint Communications) and rural manufacturers (Mohawk and Bassett Furniture).

Of course we included agriculture-related companies, from Monsanto to Deere to Tyson to companies dealing in tobacco. And we included energy producers — oil, gas and coal.

Daily Yonder
This chart shows the progress of the DY 40 (in green), the Dow Industrials (red) and the S&P 500 (blue) since July 1, 2007.

All these companies were based in rural America, or they hired mostly rural workers, or they sold mostly to rural customers. Together, they were the corporate, big business face of rural America.

In the year that followed, all the stock market indices fell. And since early 2009, all the stock indices have made a comeback. The Yonder 40, however, has rebounded with greater vigor than either the S&P 500 or the Dow 30.

As you can see in the chart above, the Dow is still 19% below what it was in July 2007. The S&P 500 is 22% below what it was nearly three years ago. The national stock indices have not shown the resilience of those stocks in the DY 40.

Rural companies have not all fared equally, of course. Some companies have gone out of business. Fleetwood Enterprises, for instance, was in the original 40, but the mobile home maker was dropped when it went into bankruptcy. Ditto with FairPoint. Lee Enterprises, the newspaper owner, was taken out of the index when its stock dropped so low the company was threatened with delisting (Lee has since edged up, but its $3.16 price is well below the $20 price when the DY 40 began.) Other companies were bought, such as Burlington Northern railway and UST Inc, the tobacco producer.

Over the last three years, we have added stocks as some fell out and rebalanced the fund as these new stocks were added. We’ve also reinvested dividends.

Unfortunately, we are not quite smart enough here at the Yonder to calculate a direct comparison between stock prices in July of 2007 and those last Friday afternoon. However, we can see which stocks were the biggest gainers over the years — and which were losers.

In the last several months, Cabela’s Inc., the outdoor outfitter, has shown the most growth. Cabela’s stock price has nearly tripled since November. The giant of rural retailing, Wal-Mart, is up for the long run — its stock price is more than 16% higher than it was when the Yonder 40 started.

Energy stocks have done well recently — Walter Energy, a coal producer, has nearly tripled since November — and rural manufacturers (Bassett and Mohawk) have also rebounded in the last six months. Waddell & Reed Financial, the small town financial services firm, is ahead of July 2007.

Several sectors that are still weak. The bank stocks continue to lag; Dean Foods, a milk producer, is at roughly half the price it was when the Yonder 40 began. Skywest, the regional airline, is down by about a third from July 2007. 

Only six rural stocks out of the 40 have lost ground since the end of November 2009, however. They are Monsanto, RailAmerica, Frontier Communication, GreenHaven (a commodity index fund), Dean Foods and  International Speedway. The complete list of Yonder 40 stocks showing how they’ve changed since November 27, 2009, is below. 

Does the rebound of the Yonder 40 mean the rural economy is out of the recession? Not by a long shot. The Daily Yonder will report the January employment counts for rural counties in a few days, and it will show unemployment deepening in rural America.

What the Yonder 40 does reveal is that the big businesses centered in rural America are doing much better than those without a rural attachment.[img:40March10.png]

 

 

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