Arkansas-based stocks had a decidedly mixed 2020, scarred in the spring with the onset of the coronavirus pandemic but buoyed somewhat by investor confidence and other factors for the rest of the year.
"The investing theme in 2020 was dominated by the impact of the covid-19 pandemic on the economy and subsequent [economic] recovery," Leon Lants, managing director at Stephens Inc. in Little Rock, said Thursday after markets closed for the year.
"Equities traded near their lows in late March, followed by a substantial rally as the market responded to both monetary and fiscal U.S. government support," Lants said.
The Arkansas Index, a joint venture between the Arkansas Democrat-Gazette and Bloomberg News to keep track of the publicly traded companies based in the state, closed the year at 485.62, just 8.18 points above 2019's close. The index is price weighted, meaning each stock affects the index in proportion to its price per share.
On March 23 the index closed at 289.93, ultimately the low mark for the year and nearly 200 points off a record high set just three months earlier.
The U.S. government's response and the race to create a vaccine were a continuing refrain through the rest of the year, with ebbs and flows in the stock market depending on the news of the day.
"The index lost over 33% in the first quarter but posted gains of over 21% in the second quarter, 8% in the third quarter, and 16% in the fourth quarter," Lants said. Lants noted the index's "modest gain" of 1.76% alongside gains of more than 16% in the S&P 500 Index and 18% in the smaller capitalization Russell 2000 Index.
Fourteen Arkansas stocks are spread across five sectors:
• Banking: Home BancShares, Bank OZK and Simmons First.
• Consumer/Retail: America's Car-Mart, Dillard's, Tyson Foods, Walmart and Murphy USA.
• Energy: Murphy Oil Corp.
• Real estate investment trust: Uniti Group.
• Transportation: ArcBest Corp., J.B. Hunt, P.A.M. Transport and USA Trucking.
(Windstream, the Little Rock telecommunications company created as a spinoff of the former Alltel Corp., was taken off the index after it settled a bankruptcy case in September and became a privately held company. It made its debut on the Arkansas Index in July 2006.)
Of the five Arkansas sectors, transportation fared the best, said Chris Harkins, managing director at Raymond James & Associates in Little Rock.
"Arkansas is a large transportation state with four public traded companies," Harkins said. "Three out of four outperformed the average, with ArcBest Corporation leading the pack, up an astounding 54%, followed by USA Truck at 19% and JB Hunt at 17%. Only P.A.M. Transport suffered a negative return, down 15%. If and when our economy opens up, these types of companies could continue to perform well."
Retail was mixed, with Walmart shares up 21% for the year and Dillard's shares down 14%, Harkins said. "Like many retailers, Walmart has adapted to a different type of consumer experience, expanding their parking lot pick up and home delivery. Retail has been challenging at best for many years and last year saw hundreds of major retailers declare bankruptcy."
Lants also noted some resilience in the Arkansas transportation and retail stocks.
"Although somewhat mixed in the individual performance of the constituent members, the transport companies helped drive outperformance, along with retail companies seen resilient to consumer spending habits," Lants said. "Performance was mixed across capitalization levels as investors became more confident of financial survival while reduced representation of technology names contributed to the index's underperformance versus the broader market."
Banking "has been a wild ride as Bank OZK managed to eke out a gain of 2.5%," Harkins said. "Home BancShares out of Conway was flat and Pine Bluff-based Simmons First suffered the most finishing, down 20%. Despite these unimpressive results for 2020, please keep in mind that at one point this past year the same stocks were down more than 40%. With the potential of an improving economy, some Wall Street analysts are upbeat on financial stocks in the year ahead."
The oil market tanked in early spring with a price war between Saudi Arabia and Russia. U.S. prices dropped as much as 34% in early March, and global prices dropped briefly into the negative in April. Millions of Americans also began working from home, resulting in less demand for gasoline, a trend that continued through the rest of the year.
Stocks of Murphy Oil Corp., which moved to Houston from El Dorado in 2020, dropped to a low of $4.50 at one point.
"Time will tell if they can turn things around," Harkins said. "Having finished the year at $12 a share, Murphy once saw shares as high as $90 and as high as $60 a share just five years ago."