Friday, July 25, 2014

As Unemployment Rises, So Do Rural Stocks

03/23/2009

Daily Yonder Compared to the Dow and the S&P 500, the Yonder 40 has done well in the past few weeks.

Rural companies have bounced back from the lows of early March, with the Daily Yonder 40 stock index climbing nearly 15 percent in the last two weeks — better than the Dow Industrials (up 9.8 percent), the Standard and Poor 500 (up 12.5 percent) and the NASDAQ (up 12.6 percent).

Even as rural unemployment mounts, the Yonder 40 gains.

The DY 40 is still down mightily since it began in July 2007 — off 42 percent since then — but the 40 stocks picked to reflect the rural economy are still doing better than the other major indices of publicly traded stocks.

Since the market bottomed in the week ending March 6, all but three Yonder 40 stocks have gained value. Those three losers are milk producer Dean Foods, FairPoint Communications and food producer Ralcorp Holdings. See the chart below for all the DY 40 stocks.

Several sectors that have been losing ground for months bounced back during this short  uptick in the market. Energy stocks had been hit hard over the past several months, for example. In the last two weeks, however, Peabody Energy, the coal producer, jumped nearly 23 percent. (Peabody announced that it was opening the largest coal surface mine east of the Mississippi River, in Sullivan County, Indiana.) Coal producer Cimarex rose 19 percent.

Food producers as a group have been a mediocre lot recently. Hormel was up only 2 percent (sales of Spam notwithstanding). Ralcorp and Dean were down, as we reported. ConAgra was up only 2 percent. Meat producers did better, with Tyson up 14% and Smithfield up a whopping 41% in two weeks. (Both stocks had been battered in recent months.)

Discount stores (Wal-Mart and Family Dollar) held up during the downturn. (Family Dollar was already up 70 percent in the last year, so how much more could it rise?) But in the last two weeks more upscale rural retailers showed some spark. Cato, the retailer of women’s fashion, reported sales in late February that were 11 percent above those reported in 2008 — and the stock increased 23.5 percent in two weeks. Stage Stores were up 46 percent as the rural retailer benefited from a national rebound in retail sales in February. Same store sales for Wal-Mart in February were up 5 percent over February of 2008.

Tractor Supply was up 18 percent as it announced projections that the U.S. can support as many as 1,800 stores. Tractor Supply now has 855 stores and expects to add up to 80 more in 2009.

Everywhere, rural businesses were offering deals to bring customers back. The Washington Post reported that backstretch tickets for the Daytona 500 in February had been cut from $99 to $55, the lowest price since 1995. Bristol was adding rock bands to bring fans to the Tennessee track. (The Yonder 40’s International Speedway Corp. was up 27 percent in the last two weeks.) 

Still, the signs of recession remained strong in businesses that serve rural communities. Transportation companies were still down as export markets slowed to a crawl. Container traffic through Los Angeles fell 32.6 percent in February, as imports and exports dropped by double digits.

Deere & Co. has been steadily lowering costs and lowering inventory. It hasn’t been enough to satisfy investors, according to the Wall Street Journal. Deere’s stock price dropped to a six year low earlier this month, but it recovered 20 percent over the last two weeks. Deere said it expected to sell a lot of high-horsepower tractors this year, even as foreign sales slump.

There was little recovery with Penn Virginia Corp., the energy company, which hit a five year low. (The stock picked up only 7 percent in the last two weeks.) Penn Virginia is one of the energy companies active in the hot gas fields of north Louisiana and east Texas. But it is reducing spending from last year, especially drilling in Mississippi and in South Louisiana.

Companies are looking everywhere for new profits. As proof, Tyson is investing in a company that makes deli-like food for pets. People may cut corners for themselves, but the company believes people will still spend for their pets.

Here is the full listing for the Daily Yonder 40 for the week ending March 20, 2009. The chart shows price and percentage changes since the market bottomed March 6: Yonder 40 Stocks March 20, 2009