You knew the good times for the stocks of publicly held electrical manufacturers, distributors and contractors wouldn’t last forever, but the steep declines in share prices year-to-date are a real kick in the head to shareholders who may have been getting used to many electrical stocks outperforming the market indices year-after-year.
After several years of double-digit annual increases for many of the 40-plus stocks that EM tracks (see chart below), it’s shocking to see so many quality stocks down -10% or more year-to-date through June 30. Quanta Services, the electrical contractor that specializes in utility work and renewables, was the only electrical stock in EM’s watch list with a gain since January and is enjoying a +11.6% increase in its share prices year-to-date and a +38.1% increase year-over-year through June 30. In fact, if a company is one of less than 10 electrical firms whose shares are down less than -10% so far this year, they can claim a victory of sorts. That’s because their shares are performing better than those of more than 30 electrical manufacturers, distributors and contractors — as well as the three major market indices: the Dow Jones Industrial Average, down -15.9% YTD; the S&P 500, off -21.1% for the year; and the NASDAQ, bringing up the rear with a -30.3% YTD decline. As a group, the stocks of publicly held electrical manufacturers were down most with a -25.7% YTD decline, followed by contractors stocks with a -17.2% decline; and distributors with a -11.7% decline. Compared to other publicly held electrical companies, Nucor (-7.6%); Dialight (-9.1%); W.W. Grainger (-10.9%); Hubbell (-13%); and Emerson (-13.3%) had milder YTD declines in their share prices.
The change of fortune has been particularly brutal for some well-regarded commercial and industrial manufacturers currently suffering with YTD declines of worse than -30%: ABB (-30.5%); Legrand (-31,8%); Schneider Electric (-35.5%); Siemens AG (-36.5%); Generac (-39.5%); and Rockwell Automation (-41.5%). Generac’s tale of woe on the stock front may be the saddest of them all. Its shares are down -49.3% year-over-year and off -57.2% from their all-time high of $505.80 on Nov. 1, 2021. On an annual basis, Generac’s shares had run up +97% in 2019; +123% in 2020; and +57% in 2021. From early 2019 when they were selling for about $51 per share, they shot up +892% to their peak in Nov. 2021.
As ugly as electrical stock performance has been this year, it’s always important to remember the outstanding long-term average annual performance of the market indices. According to historical performance data posted at www.macrotrends.net, since 1970 the Dow Jones Industrial and S&P 500 both averaged an approximate annual return of +8%, while the NASDAQ has averaged a +12.5% annual return is since 1972, its first full year of published returns.
This year’s nightmarish stock performance is tough to swallow, but it may not improve very fast. The most respected economists and stock prognosticators on the planet believe the stock market won’t cycle back to more typical returns until the war in Ukraine is over; inflation cools off; interest rates settle down; and supply chain shortages improve.
