The publicly traded companies that make up the Pelican State Portfolio were once again outperformed by the broader markets in the first quarter, as local bank stocks and Monroe-based Lumen Technologies all stumbled.
The 19 businesses in the index were down 10.47% in the first quarter and 14.75% for the 12-month period ending March 31. In comparison, the S&P 500, which tracks 500 large companies, was up 6.64% for the quarter and down 9.29% since March 31, 2022. The Russell 2000, which follows small-cap stocks with an average market capitalization of $1.3 billion, was up 1.85% for the quarter and down 12.93% for the 12-month period. The Dow Jones Industrial Average, an index of 30 top businesses, was up 0.38% for the quarter and down 4.05% for the preceding 12 months.
Regional bank stocks were hit hard in the first quarter, due to the high-profile collapses of Silicon Valley Bank and Signature Bank. That spilled over to affect local institutions, even if they weren’t heavily concentrated in the tech industry or betting heavily on cryptocurrency, like SVB and Signature. More than a third of the companies in the Pelican State Portfolio are banks.
“People tend to glump these banks all in together,” said Peter Ricchiuti, a finance professor at Tulane University who tracks regional stocks across the South through the university’s Burkenroad Reports. “These smaller banks are run more conservatively, too.”
Investar Holding of Baton Rouge was down more than a third for the quarter, while Hammond-based First Guaranty Bancshares dropped 31% and of Baton Rouge dropped by more than 23%.
All three are well-run banks that have outperformed the market over the past few years. “I don’t think these banks are worth 30% less than they were six weeks ago,” Ricchiuti said.
Some financial institutions may have fallen victim to an end-of-the-quarter selloff from investors, who wanted to dump shares rather than have to explain why they kept regional banks in their portfolio, he said.
“The odd part is there is no business in the world more regulated than banking,” Ricchiuti said.
The biggest loser in the first quarter was Lumen Technologies. Shares of the telecommunications firm dropped by nearly 51% in the first quarter.
The stock has been beat up in recent months. Lumen sold off its local telephone business in 20 states and announced plans to drop its quarterly dividend.
Those factors led the S&P 500 to announce in early March it was dropping Lumen from its listing due to the drop in its market capitalization and trading volume. That caused the stock price to fall further, because so many investors replicate the S&P 500. The stock is now being traded on the less-followed S&P 600 small-cap index.
The biggest winner in the first quarter was Lafayette-based VieMed, which saw its share price go up nearly 25%. The home health company focuses on treating patients with breathing issues such as sleep apnea and chronic obstructive pulmonary disease.
“That’s a real growth business,” Ricchiuti said, noting there is a large pool of people with undiagnosed breathing problems. “It’s a fragmented market and they’re trying to be the big public player in that area.”
Another winner was Pool Corp. The Covington-based wholesale distributor of swimming pool equipment and supplies saw its share price increase by 11% in the first quarter.
Pool Corp. had been one of the big winners during COVID, when families were stuck at home and looking for improvements to make around the house. In November 2021, the stock hit an all-time high of just under $574 a share. But the business had a rough 2022 after it posted earnings reports that failed to meet Wall Street expectations.
Now that the stock price has fallen, the company is starting to attract investor attention once again.
“It’s a terrific company with a terrific runway,” Ricchiuti said. “They just had to grow into their earnings.”
Burkenroad Reports will hold its annual investment conference from 8 a.m. to 1 p.m. April 28 at The Ritz-Carlton Hotel, 921 Canal St.
The conference will feature presentations from leaders with 16 public companies, including Pool Corp., Haverty Furniture Cos., Crown Crafts and First Guaranty Bancshares Inc.
Howard Marks, a billionaire investor whose newsletter is read by thousands, including Warren Buffett, will be the keynote speaker.
The event is free, but registration is required. To sign up, visit freeman.tulane.edu/burkenroad-reports.
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