Stockholders in North Carolina’s biggest companies shared in the wealth of the broader market in 2012 as investors seemed more willing to shake off bad headlines and take on more risk.
Thirty-eight of the state’s 50 largest publicly traded companies by revenue posted stock-price gains over last year, according to a Charlotte Observer analysis of Bloomberg data. That’s more than twice as many as in 2011.
Measured like an index, the stock prices of the state’s largest companies increased 11.3 percent. Measured another way, if you’d invested $100 in each of the companies at the end of last year, you’d have reaped a 14.6 percent return, not including dividends.
The S&P 1500 index, a broad measure of the overall market, gained 13.7 percent.
Of course, nobody structures their portfolio based on where a company is headquartered. But these measures do provide a snapshot of the health of the largest companies based in North Carolina.
Shares of Bank of America, the state’s largest corporation and the year’s top performer, more than doubled in price after a dismal 2011.
Three out of the top five performers were all tied to the state’s historic textile industry. Culp, Unifi and Hanesbrands all gained more than 60 percent as falling cotton prices improved their financials.
While bearish investors seemed willing to sell on any negative headline in 2011, that didn’t seem to be the case this past year.
The summer 2011 debate over the debt ceiling and Standard & Poor’s downgrade of U.S. debt sent markets into a tailspin. But in 2012, stocks kept performing even during weeks of stalemate over the “fiscal cliff” of tax increases and spending cuts.
“The market seems to have been shrugging that off,” said Judson Gee, managing partner of JHG Financial Advisors in Charlotte. “We got used to that volatility.”
Why? Look at corporate earnings.
“The earnings have been, except for maybe the third quarter, much better than expected, and earnings should drive the stock market,” Gee said. “Stocks are cheap.”
Gee said investors have continued to favor “value” stocks that provide a significant dividend. Some N.C.-based dividend-payers posted stock price returns greater than 15 percent, including Greensboro-based apparel maker VF Corp., Raleigh’s Martin Marietta Materials and Charlotte-based SPX, which makes industrial equipment.
Charlotte-based Duke Energy, another dividend payer, declined 3 percent as it weathered state investigations into its merger with Raleigh-based Progress Energy.
North Carolina’s companies largely mirrored the performance of their broader industries. U.S. financial companies posted some of the strongest gains, typified by Bank of America and by Winston-Salem’s BB&T, which rose 16 percent.
Consumer discretionary companies also outperformed the market – think Winston-Salem’s Krispy Kreme Doughnuts, up 43 percent.
At the top
But no company came close to the stock increase that Bank of America posted.
In a December interview with the Charlotte Observer, CEO Brian Moynihan said investors responded to the bank’s efforts to cut costs, stabilize revenues and sell off business lines and assets not core to its business. He also cited the bank’s progress in working through mortgage issues stemming primarily from its 2008 acquisition of subprime lender Countrywide Financial.
“The entire question comes down to running the business well, serving our clients well and converting that to good sustainable profits for shareholders,” Moynihan said. “As it’s become more clear that we’re moving on a path, the stock price has moved up. The job to sustain it is to keep driving the earnings up.”
Granted, the price jump came on the heels of an abysmal 2011 that eroded 58 percent of the share price. The bank’s stock is still down more than 70 percent from five years ago.
In another sector, the state’s top-performing textile-related companies benefited from a reduction of cotton prices after they reached historic highs last year.
Once the expensive cotton moved through the supply chain, Hanesbrands in Winston-Salem was able to turn in record third-quarter earnings, spokesman Matt Hall said.
Their stock performance is also a reminder that North Carolina is still a top textile producer, years after many factories moved overseas.
“The region is not dead,” said the CEO of Greensboro-based Unifi, Bill Jasper, during a presentation to analysts in November. “I know we hear a lot about it, but there’s still a lot of textiles produced in this region and we’re basically the last large producer standing.”
Culp’s chief financial officer Ken Bowling put it even more clearly: “By no means are we not a strong presence in North Carolina.”
At the bottom
Harris Teeter Supermarkets, based in Matthews, was one of the largest North Carolina companies to see a share price decline. The grocery chain’s stock fell 10 percent as the supermarket industry continued to deal with increased competition from supercenters like Wal-Mart and Target, warehouse clubs like Costco, as well as dollar stores and drug stores.
Harris Teeter earned $82.5 million in the fiscal year that ended Oct. 2, according to securities filings, down 9.5 percent from the year before. Sales, however, were up 6 percent to $4.5 billion. The earnings figures were affected by the chain’s purchase of 10 Lowes Foods stores in the Charlotte region.
Dunn: 704-358-5235 Twitter: @andrew_dunn