One word sums up the stock charts of some of the most respected publicly owned distributors and electrical manufacturers – Brutal, with a capital “B.”
Distributors like WESCO Distribution, Fastenal and W.W. Grainger that for most of the past few years had pretty-as-a-picture stock charts and were on all sorts of “Buy” lists today are down double-digits and are struggling to keep up with the major stock averages. The song is pretty much the same for many publicly held electrical manufacturers. Two manufacturers really singing the blues over their current stock prices are Cree Inc. and Generac. Both companies have had their days in the sun in recent years with some impressive gains. But both are now suffering with year-over-year (YOY) and year-to-date (YTD) declines of more than 20%.
It’s been quite a while since so many electrical stocks lagged the Dow Jones, S&P 500 and NASDAQ Indices, which themselves are now mostly in negative territory. Through Sept. 30, the Dow Jones was down -4.5% YOY and -8.7% YTD, and the S&P 500 was down -2.7% and -6.7%. The more technically inclined NASDAQ Composite is actually up 2.7% YOY, but down -2.3% YTD.
The news isn’t all bad for electrical stocks. While Acuity Brands’ stock is off sharply from its 50-Day and 200-Day Moving Averages, shares topped $200 in August before settling down around the $170 level and are up 49.4% YOY and 25.6% YTD. Magnetek, up 60% YOY and 25.6% YTD, now leads all electrical stocks when measured by YOY return, followed closely by LSI Industries, up 41.1% YOY and 30.7% YTD. Amongst publicly held contractors EMCOR Group Inc. can brag on its 11.5% YOY increase, but Quanta Services Inc., which had a nice run over the $30 per share level last year, is now down 33.3% YOY and 14.6% YTD.
It’s puzzling to see the stock prices of so many blue-chip companies so far off from their recent performance. While the stock market often reflects investors’ feelings about the future health of the overall economy, many economic measures of the electrical construction and industrial markets point to a decent business climate in 2016. Since some of the electrical stocks that have fallen most are also the ones that had some of the best recent gains, profit-taking may be an issue, as it has been in the overall market. Other factors may be the high price/earnings ratios of some sticks and uncertainty about the 2016 election and the global economy.
