2008 Was Terrible For Stocks, But Less So For Rural Businesses
The two best performing stocks in the S&P 500 were businesses based in rural America. And Wal-Mart didn't do bad either.
The Dow Industrial index of 30 large company stocks had their worst year since 1931, losing just about 34% of its value in 2008. The Dow did better than either the Standard & Poor 500, which lost 38% last year, or the NASDAQ composite, down 40.5%.
Beating all these averages in 2008 was the Yonder 40, the Daily Yonder's basket of 40 stocks picked to reflect the rural economy. The DY 40 was down only 31.3%. (See how all the companies in the 40 fared last year, on the next page.)
The Yonder 40 was helped by having some of the best performing stocks in the major indices. The two best stocks in the S&P 500 in 2008 were UST, the smokeless tobacco producer, and Family Dollar, the Main Street retailer. UST rose 27% last year and Family Dollar jumped 37%. Both are members of the Yonder 40.
And Wal-Mart, a DY 40 stalwart, was one of only two stocks among the 30 companies in the Dow Industrials to show positive returns in 2008. Wal-Mart rose 16.6% last year. (The only other Dow stock to gain last year was McDonald's, which rose nearly 6%.)
Just five stocks in the DY 40 gained ground in 2008. Besides UST, Family Dollar and Wal-Mart, retailer Tractor Supply and the Florida land management firm Alico both had positive years in '08. Tractor Supply (the stores that sell "the stuff you need out here") was up two percent. Alico rose 14%.
The other 35 Yonder stocks lost, some dramatically. Two DY 40 stocks lost nearly all of their value in 2008. The recreational vehicle maker Fleetwood Enterprises started the year selling for $5.80 a share. But as rising fuel prices decimated the market for RVs, Fleetwood dropped to just ten cents a share and is on the verge of being delisted by the New York Stock Exchange.
The small town newspaper company Lee Enterprises suffered a double whammy: It borrowed $1.5 billion in 2005 to buy more newspapers just as the industry was entering a free fall and now has to manage this huge debt in a time where borrowers are reluctant to extend credit. Lee began the year with a stock worth $14.53 a share and ended with shares selling for 41 cents. Lee, too, has been notified by the NYSE that it may be delisted.
The Yonder 40 began in July, 2007. By the end of last week, the index of rural-based stocks was dead even with the Dow 30.
Nearly every sector and every company was hit hard in 2008 — by tight credit, high fuel prices, rising costs or declining markets. Here is an update on some of the companies in the Yonder 40.
“¢ Plum Creek Timber sold 130,000 acres of Montana forest to The Nature Conservancy and The Trust for Public land for $150 million in cash last year, a move that raised the company's earnings in the fourth quarter.
“¢ Energy prices were way up and then they dropped, causing Penn Virginia to cut its spending in 2009. The oil and gas production and exploration company had planned to spend $400 million this year. Like many other energy companies, however, Penn Virginia cut its spending plans and now has budgeted only $250 million for 2009.
“¢ Coal companies led the DY 40 for the first part of the year, but dropped precipitously as energy prices fell. Peabody Energy was down 63% and Cimarex was off 36%. Equipment maker Mine Safety Appliances dropped 54% last year.
The election of Barack Obama as president presents an uncertain future for coal. Mr. Obama's choice for Energy Secretary, Nobel Prize winning physicist Steven Chu, called coal "my worst nightmare" in a 2007 speech. Obama has endorsed clean coal technology, however, and that has led to a revival of the FutureGen project in rural Illinois. American Electric Power, Consol Energy and Peabody Energy are partners in the effort to build the first commercial-scale electric generating facility that would capture and store emissions from burning coal.
The three companies had agreed to pay for 26% of the cost of FutureGen if the federal government paid for the rest. The Bush Administration pulled out of the project when its price doubled to $1.8 billion. The plant was to be built near Mattoon, Illinois.
“¢ As Americans reduced their spending, they became particularly reluctant to buy home furnishings. Home furnishing sales were down more than twice the decline suffered by retail sales as a whole. So furniture maker Bassett Furniture saw its business drop and its stock drop 63% last year. Bassett has suspended dividends during this downturn.
“¢ Rural retailers seemed to do better than retailers more tied to the cities. As we've noted, Wal-Mart, Family Dollar and Tractor Supply all rose in 2008. Cato Corp. was down only 7.4%. Sporting goods stores were hard hit, however, and so Cabela's Inc. fell 61% last year. The outdoor supplier dropped 24% in one day late in the year.
“¢ Deere & Co. tapped the Federal Deposit Insurance Corp. to guarantee $2 billion in debt. The money was raised by the farm equipment maker's financing arm. Most of the FDIC's guarantees have gone to more traditional savings and loan companies. But Deere finances farm equipment sales and the government is trying to free up credit in all sectors, so the maker of the green tractors has joined General Electric Capital, Goldman Sachs and Bank of America in seeking FDIC help.
Below is a listing of all the DY 40 stocks and how they fared in 2008:
|Yonder 40||Ticker||Price 12/31/08||Price Change '08||Percentage Change '08|
|Burlington Northern Santa Fe Corp.||BNI||$75.71||-$7.59||-9.1%|
|Peabody Energy Corp.||BTU||$22.75||-$38.62||-62.9%|
|ConAgra Foods Inc.||CAG||$16.50||-$7.47||-31.2%|
|Cato Corp. Cl A||CTR||$15.10||-$1.20||-7.4%|
|Deere & Co.||DE||$38.32||-$53.96||-58.5%|
|Dean Foods Co.||DF||$17.97||-$8.04||-30.9%|
|Family Dollar Stores Inc.||FDO||$26.07||$7.08||37.3%|
|Fleetwood Enterprises Inc.||FLE||$0.10||-$5.70||-98.3%|
|Gaylord Entertainment Co.||GET||$10.84||-$30.10||-73.5%|
|International Speedway Corp.||ISCA||$28.73||-$12.49||-30.3%|
|Mohawk Industries Inc.||MHK||$42.97||-$31.78||-42.5%|
|Mine Safety Appliances Co.||MSA||$23.91||-$28.10||-54.0%|
|Plum Creek Timber REIT||PCL||$34.74||-$11.48||-24.8%|
|Penn Virginia Corp.||PVA||$25.98||-$17.66||-40.5%|
|Regions Financial Corp.||RF||$7.96||-$15.63||-66.3%|
|Sturm Ruger & Co.||RGR||$5.97||-$2.46||-29.2%|
|Stage Stores Inc.||SSI||$8.25||-$6.40||-43.7%|
|Tractor Supply Co.||TSCO||$36.14||$0.78||2.2%|
|Waddell & Reed Financial Inc.||WDR||$15.46||-$21.25||-57.9%|