Higher Commodity Prices Drive Rural Investment — and Yonder 40 Stock Prices
A buck invested in the Yonder 40 on July 1 still did better than a dollar put into any of the other major stock indexes. One reason is higher prices paid for rural commodities.
The Yonder 40 continues to lead the other major stock indexes of publicly-traded companies. Since the 40 began July 1 as an index of companies that reflect the rural economy, the Yonder 40 is down 7.5%.
Not great. But still better than the Dow (down 8% since July 1), the NASDAQ (10.8%), or the S&P 500 (down 10.2%).
So what's going on? We can see that Yonder 40 stocks beaten down this winter have come back recently. This week's stock that rose from the dead is the gun-maker Sturm Ruger. Sturm jumped 17% over the past week. (The stock is still at only about half its value from July.) Retail stocks also held on to gains from the last few weeks during a volatile period of training.
There were also signs of increased investment in rural America, driven in part by the rising prices of commodities, such as grain, oil and coal. The Wall Street Journal reported that "America is back to working on the railroads." The railroads went decades without spending much on their track or equipment. But since 2000, according to the Journal, the railroads have spent $10 billion to expand tracks, buy new engines and construct freight yards. And they have $12 billion more in upgrades in the works.
A boom in agriculture world-wide, meanwhile, has increased Deere & Co.'s profits by 55% in the first quarter — and the farm equipment maker predicts it will continue to sell more tractors, combines and sprayers. (Deere was up 3% this week.)
Monsanto Co. also raised its outlook for the coming year — the second time in two months the agriculture company has raised its prediction for yearly earnings. Monsanto says it will sell more herbicide and more seed. (Monsanto was up nearly 5% in the week.)
Andersons Inc ethanol plant in Greenville, Ohio, began production this past week. The plant is co-owned with Marathon Oil.
DirecTV Group rose 10% this week after reporting that its fourth quarter revenues rose 17%, driven by strong subscriber growth in the US and in Latin America.
Even Hormel, the meat packer that has been dealing with higher corn costs, expressed cautious optimism. High grain prices have been offset by lower hog costs, the company said, and Hormel's latest per-share earnings were 10% higher than what Wall Street expected. Hormel was up 4% this week.
It wasn't all good news for Yonder 40 stocks, of course. Dean Foods fell 8% this week after fourth quarter net income dropped 55%, driven down by high dairy-commodity costs.
See the next page for the full results of the Yonder 40 for the week February 10-15, 2008.
|Companies||Ticker||Price February 15||Price Change 1/25 to 2/08||Percent Change 1/25 to 2/08|
|Burlington Northern Santa Fe Corp.||BNI||$89.11||$1.08||1.23%|
|Peabody Energy Corp.||BTU||$55.63||$1.75||3.25%|
|ConAgra Foods Inc.||CAG||$21.72||$0.72||3.43%|
|Cato Corp. Cl A||CTR||$16.15||$0.11||0.69%|
|Deere & Co.||DE||$85.00||$2.54||3.08%|
|Dean Foods Co.||DF||$24.75||-$2.16||-8.03%|
|Family Dollar Stores Inc.||FDO||$19.77||$0.11||0.56%|
|Fleetwood Enterprises Inc.||FLE||$4.30||$0.25||6.17%|
|Gaylord Entertainment Co.||GET||$31.83||-$0.77||-2.36%|
|International Speedway Corp.||ISCA||$42.07||$0.27||0.65%|
|Mohawk Industries Inc.||MHK||$72.07||-$5.79||-7.44%|
|Mine Safety Appliances Co.||MSA||$42.91||-$0.57||-1.31%|
|Plum Creek Timber REIT||PCL||$39.99||-$0.82||-2.01%|
|Penn Virginia Corp.||PVA||$42.86||-$0.69||-1.58%|
|Regions Financial Corp.||RF||$22.93||-$0.28||-1.21%|
|Sturm Ruger & Co.||RGR||$8.96||$1.36||17.89%|
|Stage Stores Inc.||SSI||$12.78||-$0.50||-3.77%|
|Tractor Supply Co.||TSCO||$39.73||-$0.54||-1.34%|
|Waddell & Reed Financial Inc.||WDR||$32.09||-$0.09||-0.28%|