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Many Electrical Stocks Prosper During One of Wall Street’s Wildest Rides

Jan. 7, 2021
Most of the electrical industry stocks that EM's editors track breezed by the annual average returns in one of Wall Street's craziest years.

It was by any measure one of Wall Street’s craziest years. We saw record highs in February followed by a COVID-induced catastrophic crash in March where the major indexes plummeted -30%. By the end of the year the market was once again setting new highs, but the bullish gains were so much bigger than the recovery in the overall U.S. economy that they seemed a bit disconnected from the reality of a world still reeling from the COVID-19 pandemic.

Many of the stocks of publicly held electrical manufacturers, distributors, contractors and alternate channels, including big boxes stores and online merchants, enjoyed much better year-over-year gains than the three major market indices — the Dow Jones Index, which was up +6% YOY; the S&P 500 Index, with a +15.3% annual gain in 2020 from 2019; and the high-flying NASDAQ Composite, with a head-snapping annual gain of approximately +42%.

More than a dozen electrical manufacturers topped the S&P 500 Index, led by Generac, which for the second year in a row post annual YOY gains in its share prices of more than +100%, with a gain of +123%. Other electrical manufacturers with annual share price gains of better than +20% include Nexans SA (+36.1%); Littelfuse (+33%); Schneider Electric (+31.3%); Eaton Corp. (+29.4%); Rockwell Automation (+24.3%); and AMETEK (+20.9%). Fastenal Co. (+35.6%); WESCO International (+33.3%); and W.W. Grainger (+20.6%) led all distributor stocks, and IES Holdings (+83.2%) and Quanta Services (+76.1%) topped the market for contractors.

Not all stocks participated in the party. The stock prices of Belden Inc. (-23.7%); Mersen SA (-25%); and Houston Wire & Cable (-34.7%) lagged the market. See the chart below for the share price performance of the 40-plus stocks that EM’s editors track.

It comes as no surprise that most of the big box stores and online merchants that EM tracks also had big years in the stock market. Shopify, a fairly new company that helps smaller businesses set up web stores, posted the biggest annual YOY gains with a +177.6% in its share prices, but Amazon’s +71.6% gain in 2020 was none too shabby , either.

The 2020 performance of home center stocks was not as spectacular, but they easily beat the returns of the Dow Jones and S&P 500 Indexes. Shares of Lowe’s were up +35.6% and Home Depot stock was up +23.8%.

It may be tough to duplicate the +43% return for the NASDAQ, or the share increases of the web-based companies that supported its surge last year. But in recent days, market analysts in financial press publications like Barron’s and on CNBC’s Squawk Box believe some of the interest in tech stocks may wane a bit this year because of their atmospheric prices, and traders are looking at better value propositions in industrial stocks, which may line up well for electrical manufacturers. According to the financial press, some stocks on their watch lists include Eaton, Schneider Electric, Generac and Quanta Services.

The financial community also appears to believe an infrastructure bill may finally get passed in Congress during Joe Biden’s term in office, and the results of the two U.S. Senate elections in Georgia have fueled that optimism. In several recent posts on infrastructure or construction stocks to track, Yahoo Finance mentioned Acuity, EMCOR and Fastenal as several of the stocks that could benefit most by this legislation.