Rural Stocks Mirror Troubled Economy

By the end of October, the Daily Yonder 40 — 40 companies that do much of their business in rural America — looked like the larger U.S. economy. Some were doing well and some were getting clobbered.

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Rural stocks were up in 2011. Then down. And by the end of October they were back to even for the year — before plunging again yesterday.

In all of its ups and downs, the Daily Yonder 40 — the 40 publicly traded stocks picked to reflect the rural economy — paralleled the larger stock indexes. By the end of October, the DY40 was down a third of one percent for the year. The Standard & Poor’s 500 was down by the same amount. The Dow Industrials was up just over 3 percent.

Tuesday, the first day in November, the Daily Yonder 40 dropped 2.9 percent. The Dow was down 2.5 percent and the S&P 500 was off 2.8 percent.

Out of the 40 stocks in the DY40, 22 had higher stock prices at the end of October than at the beginning of the year. 

The range of gains and losses among the DY40 was wide. Sturm Ruger, the gun maker, had nearly doubled in price since the beginning of the year, for example. 

Meanwhile, Penn Virginia, an oil and gas producer, and Southwest Bancorp had both lost nearly two-thirds of their value by the end of October.

Financial firms generally did poorly in the first ten months of 2011. Besides Southwest, Regions Financial, an Alabama banking firm, lost much of its value and the financial services firm Waddell & Reed was down more than 21 percent. Coal producers have been hammered in 2011. (Go to the next page to see how each of the DY40 stocks has fared in 2011.)

Meanwhile, a smattering of rural retail stocks have had good years — Cabela’s, Family Dollar and Tractor Supply. Bassett Furniture has bounced back after a disastrous few years and some food producers have gained this year after digesting higher feed costs.

In all, the rural economy seen through the Daily Yonder 40 is a very mixed bag — just like the larger economy. Here is news that is affecting rural economic sectors and individual companies:

• Walmart and Big Apple fashion didn’t get along.

The Bentonville, Arkansas, retailer opened an office smack dab in the middle of the New York fashion district in 2009, hoping to supply shoppers with trendier apparel. Didn’t work out. People weren’t buying, and so Walmart is closing its office off Broadway and moving its fashion people back to Arkansas. 

Walmart finally (re)discovered that what people wanted wasn’t high fashion, but low prices. Also, Walmart is also bringing back a larger line of plus-sized clothing.

•Walmart has been clobbered by the dollar stores. Shoppers are going to places like Family Dollar (up 18 percent by the end of October) to save money as Walmart sought out a wealthier shopper.

Family Dollar expects to open up to 500 new stores in this fiscal year.

• Those higher commodity prices are reflected in sales from Tractor Supply, which saw its recent third quarter earnings rise 43 percent. The retailer’s stock price by the end of October was up 46 percent.

• Consumers are holding on to their money. Which means they are less likely to go to NASCAR races or resorts.

International Speedway, the racetrack operator, has seen a continuing decline in race revenue because fans are staying away from NASCAR races with their high ticket prices.

And Gaylord Entertainment has had a disastrous year, down 35 percent at the end of October. Gaylord owns the Grand Old Opry.

• People will spend on hunting and fishing even if they stay away from the racetrack. 

Cabela’s, the outdoor supplier, was up 14.6 percent by the end of October. One analyst said spending on hunting and fishing equipment was more resilient because this wasn’t a hobby that could be furloughed during hard times. Outdoor sports are more a way of life.

• Admissions at LifePoint’s rural hospitals were down slightly late this year, but the stock is steady.

• Andersons, an Ohio ethanol maker, is slipping in a little wheat in its feedstock. The high price of corn is forcing ethanol producers to look for other ways to make the fuel.

Andersons is up slightly for the year despite calls for an end to ethanol subsidies.

• The failure of Congress to pass a long-term highway bill has hurt Astec Industries, a road-building firm. The Wall Street Journal reports that capital investments in construction are low in the U.S. because of uncertainty about the federal budget.

• Peabody Energy is down 32 percent this year. Walter Energy is off by nearly 41 percent. Cimarex Energy is off by almost 28 percent. All are coal producers and all got absolutely hammered this year.

Coal as a fuel is facing stiff competition from natural gas, which is cleaner and sometimes cheaper. Also, coal companies are having production problems. Their mines simply aren’t producing what the companies expected, particularly in Appalachia. The companies are still finding good markets overseas, however.

• Even though crop and farmland prices are higher, ag suppliers are mixed. Deere, the equipment maker, was down nearly 9 percent through the end of October. Monsanto was up, but only 4.5 percent. 

Some beaten down food producers are higher. Dean Foods, the milk producer, had been beaten down in 2010, but made a comeback this year, rising 10 percent. Meat producers have staunched loses and have seen a recovery in 2011. 

The financial press sees nothing but a bright future for ag companies, however. As the world population increases, the total amount of farmland is expected to remain the same. That demand for increased farm productivity is going to present opportunities. 

“Getting better seeds, fertilizers, water pumps and farming equipment to where it’s needed is what the private sector is well suited to accomplish,” says Roy Steiner, deputy director of agricultural development at the Bill and Melinda Gates Foundation, a $36 billion humanitarian institution. “Smart companies can make a difference, and make a profit.”

That doesn’t mean profits or jobs will be made in rural America. Deere, for example, is spending $124 million in Brazil to build two factories.

• Which satellite television company will become the most important to rural America?

The DY40 now has DirecTV, but there is also the Dish Network. And it’s the Dish Network that is investing in a national wireless network that will carry broadband Internet.

DirectTV invested in Blockbuster.

Here is the list of the Daily Yonder 40 stocks and how they fared during the first ten months of 2011.

 

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