Last year was record-setting for Wall Street, thanks to the steady performance of the U.S. economy and the pro-business policies being pushed by President Donald Trump and the Republican-controlled Congress.
But by and large, Louisiana-based businesses missed out on those stock gains as continued low oil prices took their toll on the state’s publicly traded companies. The Pelican State Portfolio, a group of Louisiana stocks tracked by The Advocate, actually fell 0.82 percent as a group during 2017. The fourth-quarter performance was slightly better, with the 23 stocks in the index dropping collectively by 0.54 percent for the last three months of 2017.
In contrast, the Dow Jones industrial average, an index of 30 top businesses, surged by more than 24 percent for the year, the best return since 2013. The Dow regularly set daily record highs during the year. The S&P 500 also had its best year since 2013, with the index of 500 large companies increasing by nearly 19 percent. And the Russell 2000, which follows small-cap stocks with an average market capitalization of $1.3 billion, was up by 12.5 percent for the year.
“The market was great,” said Peter Ricchiuti, a finance professor at Tulane University who tracks regional stocks across the South through the university's Burkenroad Reports. “For every month of 2017, there was a positive total rate of return for the S&P. That’s never happened before. There was so little volatility, investors became complacent.”
The biggest local winner in 2017 was H&E Equipment, the Baton Rouge-based heavy equipment rental and sales company. Its shares jumped nearly 88 percent for the year. “They’re a really well-run company” Ricchiuti said.
Not only did H&E benefit from positive developments such as the continued growth of the national economy and Trump’s desire for a bipartisan infrastructure spending plan, but negative events like the massive destruction caused by hurricanes Harvey and Maria.
“They stand to benefit from the hurricanes that occurred because there’s so much that needs to be rebuilt,” Ricchiuti said. “After disasters happen, people focus on homebuilding stocks. But behind all of that is the equipment you need.”
The two south Louisiana-based home health companies had strong gains in 2017. Lafayette-based LHC Group ended the year up 34 percent, while Amedisys, headquartered in Baton Rouge, was up by nearly 24 percent.
LHC announced in November it had reached an $850 million stock deal to acquire Almost Family in a move that will make it the country’s second-largest home health firm. “There’s a lot going on in health care,” Ricchiuti said. Right before the end of the year, Humana and a pair of private equity firms announced they would buy Kindred Healthcare, the largest home health company in terms of revenue.
“Now about the only things left are LHC/Almost Family and Amedisys,” Ricchiuti said. “Having a component of a lot of nurses is important.”
Another big winner was Covington-based Pool Corp., which was up more than 27 percent for the year. Ricchiuti noted when the company went public in 1995, it was trading at 72 cents a share. The stock ended 2017 at just under $130 a share.
The company has grown organically and now carries more than 160,000 different types of pool supplies and backyard products, including construction materials, pool care products and patio furniture. Pool Corp. continues to expand its focus and now carries irrigation products.
“The joke is they own your backyard and now they’re coming in for the front yard,” Ricchiuti said.
The big losers in 2017 were the oil and gas service companies, which have been hardest hit by the sustained low oil prices. New Orleans-based Tidewater dropped nearly 78 percent for the year, with its stock price falling to $24.40.
The company pulled off a 31:1,000 reverse stock split in the summer, meaning that for every 1,000 shares of Tidewater stock a shareholder held, they received 31 shares.
The reverse split was part of a prepackaged bankruptcy plan the company went through in order to slough off debt.
Those moves have helped Tidewater and left the company poised to do well once offshore drilling activity picks up.
“They have the same fleet of boats and there’s no debt,” Ricchiuti said. “All of the bondholders had their bonds converted to equity in the company. The clean balance sheet is the key to surviving here.”
What’s holding down the oilfield service company is the low price for a barrel of oil. Oil ended the year trading at about $60 a barrel. To make drilling in the Gulf of Mexico worthwhile, the price needs to be about $75 a barrel.
“The price needs to be stable, because it takes four to six years to bid on a lease,” Ricchiuti said. “Those service companies have got to have some hope in the longer term.”