Many investors may be hoping for a better year ahead than the one they saw during the past 12 months. With a seemingly steady stream of not-so-good economic news, it was hard not to be nervous about what the stock market might produce from day to day.
In fact, though, the market’s performance was nothing to sneeze at. The S&P 500 index, which gauges the action of large-capitalization companies across the United States, racked up a return close to 24 percent during the 12-month period that ended in mid-July.
Peter Ricchiuti, assistant dean at Tulane University’s Freeman School of Business, says Louisiana-based public companies held their own and in some cases even outperformed the big index. “We had a lot of good performers in Louisiana,” he says.
Consider Cleco Corp., the electric power company based in Pineville. Cleco shares rose almost 25 percent during the 12-month period ending in mid-July.
Or how about the impressive performance of Gulf Island Fabrication Inc., the Houma-based fabricator of offshore drilling platforms? Investors in the company’s stock enjoyed watching their shares more than double in value during the past year.
Take another example from the oil field: Shares in oil field services company Superior Energy Services Inc. soared 82 percent during the period.
Ricchiuti says Louisiana companies in the energy sector have benefitted from “much higher oil prices” than
a year ago.
He says companies in some other sectors have done well based either on upturns in their particular markets or on efficient management that buoyed returns even if sector conditions were difficult.
Ricchiuti keeps close tabs on Louisiana public companies through the Tulane program known as Burkenroad Reports. Both graduate and undergraduate students in the university’s business school may participate in the program, where they learn the fundamentals of stock analysis by examining area companies closely.
Burkenroad researchers assigned to a particular company study its operation and its position relative to competitors within the same industry. They visit the company’s headquarters and interact with top management. They examine historical rates of return on the stock and study the factors that cause the stock price to move. Then they produce a lengthy report that analyzes the company’s financial performance relative to what they have learned about the business. The Burkenroad stock reports circulate throughout the nation’s investment community.
Stocks in the Burkenroad program also form the core of the Burkenroad Mutual Fund, which is managed by Hancock Bank. Investors in the fund enjoyed a return of better than 35 percent in the past year. To learn more about the fund, visit www.hancockhorizon.com or call Hancock Investor Services at (888) 346-6300.
Some Public Companies Worth Watching
The following are profiles of some of the Louisiana-based companies followed by student researchers in the Burkenroad Reports program, which is overseen by Peter Ricchiuti, Tulane University’s assistant business dean.
Each of the profiles includes the company’s name, followed by its stock symbol; a description of its business; and brief analysis by Burkenroad researchers and Ricchiuti.
AMERISAFE Inc. (AMSF)
Chairman and CEO: C. Allen Bradley Jr.
Web site: www.amerisafe.com
Market capitalization: $437 million
Business: AMERISAFE is a property and casualty insurance holding company specializing in workers’ compensation insurance for small to mid-size employers in hazardous industries, including construction, trucking, logging, energy and maritime.
Analysis: Ricchiuti says that in focusing on insuring against low-frequency, high-severity accidents, AMERISAFE “is a good example of how smaller niche players” can succeed.
“They decided to go after the market others shied away from,” he says, citing offshore oil businesses and regional lumber companies as examples.
The Burkenroad analysis says AMERISAFE’s strengths include high underwriting standards and a sound investment strategy that contributes to overall stability. Despite uncertain economic conditions, the company has increased its earnings, researchers say. The report says a gradually improving economy should help the company grow both revenue and profits.
Cleco Corp. (CNL)
President and CEO: Bruce A. Williamson
Web site: www.cleco.com
Market capitalization: $2.16 billion
Business: Electric power generation, transmission and distribution of electricity services are the focus of this Central Louisiana company.
Analysis: The completion of a new petroleum-fired power plant called Madison 3 that can also use coal, lignite and biomass fuels helps Cleco better manage its fuel costs and comply with environmental mandates, according to Burkenroad Reports.
Ricchiuti says that being able to switch among fuels “is really paying off” for the company. “They’re able to pick the cheap fuel of the moment,” he says.
With a yield of about 3.2 percent, the company’s stock may also pay off for conservative investors seeking income. Last spring, Cleco was mentioned in financial blog “Seeking Alpha” among 12 “highly profitable utility stocks” to watch. The blog noted the company’s gross, operating and pretax margins have been well above the industry average, and its stock price gained 37 percent in the past year.
Crown Crafts Inc. (CRWS)
Chairman, president and CEO: E. Randall Chestnut
Web site: www.crowncrafts.com
Market capitalization: $45 million
Business: Crown Crafts is one of the country’s largest producers of infant bedding, bibs and bath items; the company’s operating subsidiaries include Crown Crafts Infant Products Inc. in California and Hamco Inc. in Louisiana.
Analysis: Researchers say Crown Crafts enjoys a measure of recession resistance because of continuing demand for its products under all conditions. The company’s low debt load could position it to grow through acquisition in the future, they say.
Ricchiuti says the company’s stock has rewarded investors by doubling in value in the past few years. “They have a great reputation in their industry,” he says. “Within that niche, they’re the Microsoft of baby bibs.”
Gulf Island Fabrication (GIFI)
Chairman and CEO: Kerry J. Chauvin
Web site: www.gulfisland.com
Market capitalization: $481 million
Business: A global leader in the fabrication of oil and gas drilling and production platforms, the company specializes in construction of offshore and inshore platforms, living quarters, electrical buildings, process vessels, skids and small modules.
Analysis: Having recently landed three new projects totaling $125 million and more than 1 million man-hours, the company has extended its work backlog substantially. The projects include a 320-foot dry dock for the Terrebonne Port Commission, a 6,200-ton process module for ATP Oil & Gas Corp. and a 7,000-ton topside for Williams Partners’ floating production system.
Ricchiuti says Gulf Island’s strengths include steady profitability and low debt. In addition, renewed interest in shallow-water drilling should benefit the company. “The stock has done really well,” he says.
Hornbeck Offshore Services (HOS)
Chairman, president and CEO: Todd M. Hornbeck
Web site: www.hornbeckoffshore.com
Market capitalization: $747 million
Business: Hornbeck provides transportation and services to the oil and gas industry, including offshore supply vessels and transportation services in the Gulf of Mexico, certain international markets and Puerto Rico.
Analysis: The crunch on deep-drilling activity in the Gulf of Mexico following the BP oil disaster hit Hornbeck Offshore Services hard. But indicators are that both drilling and Hornbeck are rebounding.
Ricchiuti says that while the number of deep-water rigs operating in the Gulf plunged from 34 to seven following the disaster, the number could rise to as many as 20 rigs by the end of this year. He says the Gulf probably holds the last big oil and gas finds of this century and Hornbeck is “incredibly well- positioned” to tap into the bounty.
Investors may have to wait a bit, but the high-tech vessels that are Hornbeck’s specialty are sure to be in demand as the Gulf begins to buzz again, he says.
IBERIABANK Corp. (IBKC)
President and CEO: Daryl G. Byrd
Web site: www.iberiabank.com
Market capitalization: $1.58 billion
Business: The holding company for IBERIABANK, IBERIABANK Corp. is Louisiana’s largest bank holding company; its subsidiary offers commercial and retail banking products and services in several states.
Analysis: IBERIABANK has had a huge growth year, completing acquisitions of Metairie-based Omni Bank, which solidified its hold in New Orleans; Cameron Bancshares; and several failing banks in Florida acquired on very favorable terms with assistance from the federal government. CEO Daryl Byrd has indicated the company will continue its journey on the acquisition trail.
Ricchiuti says he’s also been impressed with the company’s startup of an investment banking group, which he says is stocked with top-notch talent. “They’re turning into a very fine super-regional bank, and they’re home-grown,” he says.
McMoRan Exploration Co. (MMR)
Co-chairman, president and CEO: James R. Moffett
Web site: www.mcmoran.com
Market capitalization: $2.87 billion
Business: Shallow-water deep-shelf drilling operations in the Gulf of Mexico have become the new frontier for this company, which explores for, develops and produces oil and natural gas.
Analysis: A recent press release was typically low-key in announcing that the company’s drilling results “have indicated the potential for large accumulations of hydrocarbons” in sands more than 25,000 feet below land.
By drilling deep in the shallow waters of the Gulf, McMoRan Exploration has opened the prospect of huge finds of natural gas that major companies such as Exxon long ago left behind. One drilling site, which the company dubbed “Davy Jones,” has the industry – and investors – heated up.
“They have a number of shallow-water, ultra-deep rigs, and the most exciting is ‘Davy Jones’ – it’s potentially a huge well,” says Ricchiuti.
The coming months could reveal exactly what lies in those deep sands, but clearly investors believe the prospects are strong. “Davy Jones” and other projects helped to double the company’s stock price in 2010.
Pool Corp. (POOL)
President and CEO: Manuel Perez de la Mesa
Web site: www.poolcorp.com
Market capitalization: $1.44 billion
Business: Wholesale distribution of swimming pool-related products are the company’s bread and butter, and the company has recently entered into the irrigation and landscaping businesses, as well.
Analysis: Swimming pool businesses suffer during slow economic times as homeowners put off the luxury of a backyard pool until better times return. The economic recession did affect Pool Corp.’s business, but Burkenroad researchers say the slowly improving economy holds promise. In addition, people who already have pools continue to need the supplies and services that are the company’s focus.
“This is a very well-run business,” Ricchiuti says. “They make a lot on maintenance of existing pools, so the fact that few pools are being built now is not killing them.” He says during the downturn, company managers learned how to run the business “leaner” than ever. As the economy recovers, Pool Corp. is positioned to profit on the demand with products that now include lawn irrigation equipment and patio furniture, he says.
Shaw Group Inc. (SHAW)
Chairman, president and CEO: J.M. Bernhard Jr.
Web site: www.shawgrp.com
Market capitalization: $3 billion
Business: The Shaw Group is an international full-service engineering and construction firm with an integrated pipe fabrication business. It provides engineering, consulting, remediation, fabrication and facilities management services to public and private clients.
Analysis: Shaw’s strengths include a strong balance sheet, good ties to the environmental and infrastructure sectors and access to leading technology, Burkenroad researchers say. The heavy construction sector is sensitive to economic cycles and will generally lag an economic recovery.
The current economic climate has proved a challenge to this sector, but a strong balance sheet and multiple business segments should allow Shaw to emerge in a strong position, according to the Burkenroad report.
Long-term prospects appear good, but the near term is subject to ups and downs in the broader economy.
“Nuclear power is still a viable competitor to fossil fuels, and Shaw has quietly become the dominant player in that business,” Ricchiuti says.
Stone Energy Corp. (SGY)
President and CEO: David H. Welch
Web site: www.stoneenergy.com
Market capitalization: $1.5 billion
Business: An independent oil and natural gas company, engaged in the acquisition, exploration, development and operation of properties in the Gulf of Mexico and Appalachia region, the Louisiana company also has offices in Houston and Morgantown, W.V.
Analysis: By diversifying its base of reserves and expanding the scope and location of its projects, Stone Energy is building a foundation for future production growth, Burkenroad researchers say.
The company is focused on expanding into the Marcellus Shale in Appalachia, the deep-water region of the Gulf of Mexico and the Rocky Mountains. By expanding outside of the Gulf of Mexico, Stone Energy is creating opportunities to grow its reserves organically and reduce its overall operational risks, according to the report.
Continued low natural gas prices may hamper the company’s performance, but the analysts believe Stone Energy is positioned for “healthy expansion.”
Superior Energy Services (SPN)
President and CEO: David Dunlap
Web site: www.superiorenergy.com
Market capitalization: $1.52 billion
Business: Superior Energy Services is a leading provider of specialized oil field services and equipment related to the drilling and production needs of oil and gas companies; the company’s services include well intervention, rental tools, marine services, oil and gas production and other oil field services.
Analysis: Superior Energy Services plans to expand internationally and aims to generate one-third of its revenues from its international business with a focus on well intervention and rental tool products, according to Burkenroad Reports. Because of an increase in oil and gas demand, the company has increased its focus on deep-water intervention markets worldwide and in the Gulf of Mexico.
The researchers say that Superior faces risks common to its sector but the company’s strong balance sheet, ability to generate cash and strategy of growing internally and through acquisitions of other companies will help keep it ahead of its competitors.
Ricchiuti notes that Superior is a leader in the oil field business of “plug and abandonment,” a procedure that is mandated for wells that have been taken out of service permanently. If more drillers are forced to close and remove idle installations from the Gulf of Mexico, Superior could benefit, he says.
Teche Holdings Co. (TSH)
Chairman, president and CEO: Patrick O. Little
Web site: www.teche.com
Market capitalization: $70 million
Business: The holding company’s sole subsidiary is Teche Federal Bank, a community bank with a thrift charter concentrating on deposits, loans and conservative investment products.
Analysis: According to Burkenroad Reports, this conservatively managed company has solid net interest margins and earnings and the company’s “consistent earnings” have generated a capital cushion.
Researchers also point to “high credit quality” in the bank’s loan portfolio, an asset in difficult economic times.
“Teche’s success has led to sustained earnings and the ability to increase its dividend consistently over the past several years,” the report states.