Pelican Portfolio outperforms market indexes

The strong economy helped the Pelican State Portfolio, a group of Louisiana stocks tracked by The Advocate, continue to outperform the stock market during the second quarter of 2014.

The 24 stocks in the Pelican State Portfolio rose 8.4 percent in the second quarter and nearly 58 percent for the 12-month period ending June 30.

In contrast, the Dow Jones Industrial Average, an index of 30 top businesses, was up 2.24 percent in the second quarter and nearly 13 percent over the year. The S&P 500, which tracks 500 large companies, was up 4.7 percent for the second quarter and 22 percent for the 12 months ending June 30.

“I don’t think there’s any place on the planet doing better than south Louisiana,” said Peter Ricchiuti, a finance professor at Tulane University who tracks regional stocks across the South through the university’s Burkenroad Reports.

The index was led by Globalstar, the Covington-based satellite phone company that has seen its fortunes rebound since late 2012. The company completed the launch of its second-generation satellite network in early 2013, creating a clear communications network for customers across practically all the world.

Globalstar was delisted from the Nasdaq exchange in December 2012 because its stock price fell too low. But getting the satellite network into place, adding subscribers and cleaning up its debt caused investors to return to the stock. In April, Globalstar was added to the New York Stock Exchange. Shares of Globalstar closed at $4.25 on June 30, an increase of more than 60 percent for the quarter and nearly 673 percent for the previous 12 months.

“This is one of those businesses, almost like a utility company, where you spend a lot of money getting the infrastructure up,” Ricchiuti said. “But once it’s completed, you can reap the benefits.”

The second-biggest gainer in the quarter was PetroQuest Energy, the Lafayette company that has become a player in the Eagle Ford Shale in south Texas, a hot area for oil and gas production. Shares of PetroQuest rose 32 percent in the second quarter to reach $7.52 a share. That’s the same increase PetroQuest had in the first quarter. For the 12-month period ending June 30, the stock has gone up nearly 90 percent.

Ricchiuti said the rise of PetroQuest shares shows one of the biggest stories happening in the U.S. economy: America’s energy independence.

“What’s going on in Iraq is interesting,” he said. “If you look back 10 years ago and Middle Eastern production was taken off the table, there would have been a spike in U.S. oil prices.” But during the quarter, at a time when motorists start to drive more for summer vacations, oil prices have hovered between $100 and $107 a barrel.

“That pricing tells us that we have energy independence,” Ricchiuti said. “And that’s priceless for what it means to the economy.”

Entergy had the third-best performance during the quarter. The New Orleans-based utility company saw its stock go up by nearly 23 percent in the quarter, ending the period at just over $82 a share. The company was boosted by “significantly” higher wholesale electricity prices, thanks to cold winter weather and the limited capacity of natural gas pipelines to the Northeast.

Another utility stock that surged during the quarter was Cleco, which jumped up 16.5 percent to end at just under $59 a share. Cleco was boosted after a report surfaced that Borealis Infrastructure, a Canadian investment firm backed by the Ontario Municipal Employees Retirement System, put in an unsolicited $5 billion bid for the company.

“There will be more bidders coming in,” Ricchiuti said. Cleco is an attractive company, because it supplies all the power to St. Tammany Parish, as well as Erath, where several natural gas pipelines converge and the fuel is priced.

Potential buyers are Entergy and The Southern Co., which has more than 4.3 million utility customers in Alabama, Georgia, Florida and Mississippi.

“It’s not like there are a lot of these public utilities sitting in your coverage area,” Ricchiuti said.

The biggest loser during the quarter was H&E Equipment Services, a Baton Rouge-based equipment sales and rental company. Shares fell by more than 10 percent.

H&E was hurt by the concerns that the economy was slowing down, brought on by the drop in the national gross domestic product during the first quarter, Ricchiuti said.

“This is all more of a function of general market conditions, such as the huge run in the last year,” he said. “H&E is the kind of bellwether stock that would be affected by a slowdown.”

Pool Corp., of Covington, a wholesale distributor of pool supplies, and Amerisafe, a DeRidder company that specializes in worker’s compensation insurance for people in hazardous jobs, also saw significant drops in the quarter. Pool Corp. was down by nearly 8 percent, and Amerisafe was down by 7 percent.

Ricchiuti said both companies were affected by concerns that the Federal Reserve will be easing off the near-record low interest rates. Higher rates would affect the homebuying industry, and that, in turn, would slow down swimming pool construction.

Amerisafe has benefitted from being a solid fixed-income investment at a time of low interest rates. Insurance companies that are not involved in complex securities, like Amerisafe, have been attractive to investors, Ricchiuti said.

“Once interest rates go up, the thinking is these companies tend to do not as well,” he said.