Arkansas-based stocks on Tuesday ended their worst quarter since the recession of 2008-2009 and, once again, financial experts don't know when the bleeding will stop.
The Arkansas Index, a joint venture between the Arkansas Democrat-Gazette and Bloomberg News, fell 33.61% in the first quarter.
The index closed Tuesday at 316.98, compared with its closing of 477.44 on Dec. 31.
The index hit its record high — 478.25 — on Dec. 20.
The index is price weighted, meaning each stock affects the index in proportion to its price per share.
The Arkansas stocks are spread across six of the stock markets' 11 sectors:
Banking: Home Banc-Shares, Bank OZK and Simmons First.
Consumer: America's Car-Mart, Dillard's, Tyson Foods and Walmart, Murphy USA.
Energy: Murphy Oil Corp.
Real estate investment trust: Uniti Group.
Transportation: ArcBest Corp., J.B. Hunt, P.A.M. and USA Trucking.
"Returns for the Bloomberg Arkansas Index for the first quarter of 2020 lagged both the larger capitalization S&P 500 Index as well as the smaller capitalization Russell 2000 Index," said Leon Lants, managing director at Stephens Inc. in Little Rock.
"Although the energy sector accounted for the largest negative performance" in the index, "the remaining sectors — including financials, consumer, and transportation — all posted negative returns, reflecting their exposure to the downturn in the national economy," Lants said.
"Index constituents with larger market capitalizations outperformed the smaller members as investors sought the safety of larger balance sheets and liquidity," Lants said. "Interestingly, the [index] peaked in mid-December 2019 while the Russell 2000 Index turned lower in mid-January and the S&P 500 Index continued to new highs until mid-February, with each index finding lows for the quarter in late March."
Chris Harkins, managing director at Raymond James & Associates in Little Rock, noted the challenges particularly facing Murphy Oil Corp., based in El Dorado. "Murphy Oil has really been hit hard down 77% on a combination of oil prices and sentiment," Harkins said.
"Many other oil stocks are off around that same amount as Saudi Arabia continues to flood the market with crude, keeping prices low in what is becoming a potential 'competition killer,'" Harkins said. "Prices this low, while great for consumers at the pump, are a huge hit to [U.S.] oil companies that require higher prices to sustain profitable operations."
In its annual proxy to the Securities and Exchange Commission, Murphy Oil on Tuesday wrote: "These are unprecedented times for Murphy. Our entire industry has been disrupted both by the covid-19 pandemic as well as recent volatility in the global oil markets. In just the first quarter of 2020, Murphy stock has closed daily trading as high as $28 per share, and as low as below $5 per share."
Retail gas station company Murphy USA fared better than its former parent, Harkins said. "While down 28% this year, analysts polled by Thomson Reuters suggest that shares could be worth 42% more over the next year," Harkins said. "That would bring it back to their 52-week high. Murphy USA earns much of its profit, not from the pump but mostly from what it sells inside their stores."
Transportation stocks have suffered during the entire quarter, Harkins said.
J.B. Hunt Transport "is holding up much better" than others on the transportation sector, Harkins said, noting that analysts have placed the company on several "watch lists" for investors to consider.
P.A.M. Transport Services'stock "was clobbered in the first quarter, down 46%," as it and other trucking companies also had to deal with weather-related stalls and a tighter border with Mexico, Harkins said.
USA Truck fared the worst among Arkansas stocks in transportation, with a 57% plunge, Harkins said. "Despite this hard slide, Thomson analysts' consensus mean stock price target is 178% above the current trading price of $3.13," Harkins said. "USA Truck's stock traded just under $30 a share just two years ago."
Bank stocks were hit hard, with Bank OZK dropping 46%, Home BancShares down 39% and Simmons First down 30%.
"Analysts are very nervous regarding the margin squeeze for the banking industry based on the aggressive rate cut from the Federal Reserve," Harkins said. "That and the possible risk of credit, not knowing the magnitude of the economic slump coming, loan loss reserves should move higher. The bright spot could be the money allocated to banks from the massive stimulus agreement passed by Congress last week."
Tyson Foods shares are 36% lower this quarter, but Harkins noted that the company's shares had dropped by half at the height of the stock sell-off this quarter.
"Tyson is attacking this shock to the system aggressively and is creating incentives for both supplier and worker to keep things moving forward," he said.
Walmart shares fared relatively well for the quarter, dropping from $118.84 to $113.62, as its stores remain a necessity for consumers.