[imgcontainer][img:Yonder40.jpg] [source]Yonder 40[/source] Daily Yonder [/imgcontainer]
The Yonder 40 stock index of companies that do a good bit of their business in rural America dropped 2.4% last week, not quite so sharp a decline as either the Dow Industrials (minus 2.5%) or the S&P 500 (down 3.4%). The DY 40 continues to lead the major stock indices in the time since it began in July 2007.
News from the Daily Yonder’s collection of companies that conduct a good portion of their business in rural America is uniformly bad. Last week, only eight companies in the DY 40 advanced. (See the full list of stocks on the next page.)
As a sign of the times, the one company that has raised its outlook for the coming year is Family Dollar Stores, the small town Main Street discounter. As the economy has worsened, discount stores have seen a rise in their business.
The Daily Yonder 40 changed slightly during the first week in July, as three companies left the index and three were added. Lee Enterprises, the newspaper publisher, and Fleetwood Enterprises, which produces recreational vehicles, saw their stocks reduced to just pennies a share. Fleetwood has been de-listed and Lee is under scrutiny by the New York Stock Exchange. UST Inc, the smokeless tobacco producer, was purchased by Altria. These three companies have been replaced in the DY 40.
The first new member of the Yonder 40 is Astec Industries, which makes products used in each phase of road building, from quarrying rock to building machinery.
The second addition to the rural stock index is LifePoint Hospitals, a holding company that owns and operates general acute care hospitals in rural communities.
The third new member of the DY 40 is the large tobacco merchant and processor Universal Corporation.
Reports in the last week about individual companies showed the extent and depth of the economic recession. The financial system is still balky, and last week many bank stocks plunged. On the Yonder 40, Regions Financial fell 35% and Southwest Bancorp fell 24%. (Regions Financial reported fourth quarter loses of $6.2 billion.) Energy stocks fell, and as agricultural commodity prices dropped even Deere & Co. dropped 20% as the market feared a continuing drop in the price for corn would force farmers to cut back on their spending.
The one bright spot in the DY 40 was the food sector. Dean Foods, Hormel Foods, Ralcorp Holdings and Tyson Foods all rose last week, as these firms benefited from lower food costs. For example, milk prices have dropped nearly in half, helping Dean Foods, which sells Horizon Organic milk and other dairy products.
News from individual companies last week gave a picture of a nation in the economic doldrums:
• Plum Creek announced it was reducing production at its four lumber sawmill facilities in Montana. It will close the sawmill in Fortine permanently. “The forest products industry in general and the lumber business in particular have been severely impacted by the battered housing market,” said Rick Holley, Plum Creek president and chief executive officer. Plum Creek is the largest private landowner in the nation, owning more than 7 million acres of timberland.
• The credit crisis has caused hospitals to delay capital spending, according to a survey released last week by the American Hospital Association. Some 45% of the nation’s hospitals announced that they are postponing capital projects. The DY’s newest member, Lifepoint Hospitals, is down 35% since the end of August, but it is doing better than any other hospital stock during this period.
• Travel is down, so business is hurting for hotel and entertainment companies. Gaylord Entertainment, a DY member, was down 19% this week.
• The Dow Jones news service reported that U.S. coal companies would continue to cut production in ’09. Peabody Energy, a DY member, has already announced cutbacks at its mines in Wyoming’s Powder River Basin.
• A bad housing market has hurt the furniture maker Bassett Furniture. The company reported that its fourth quarter net earnings were down 83% from last year.
• Thousands of empty railroad freight cars are parked on unused track across the country. The Dow Jones news service reported that the three largest U.S. railroads said this week that they have put 107,000 rail cars in storage — 17% of their combined fleets. “There’s been sort of an unprecedented decline in [freight volume] in the last two months,” Dahlman Rose & Co. analyst Jason Seidl said. “The last thing you want to do is have the equipment clogging up [track].” DY 40 member Burlington Northern has furloughed 2,000 workers.
Here is a full listing for the Yonder 40 for the week ending January 23, 2009: