A big drop in
A big drop in the stock price for two Louisiana-based home health companies caused the Pelican State Portfolio to lag behind the performance of the broader markets during the third quarter.
The 20 Louisiana-based publicly traded businesses that make up the portfolio were down by 7% collectively for the quarter. The stocks did outperform the indexes over the 12 month period ending Sept. 30, going up 55.4%.
In comparison, the S&P 500, which tracks 500 large companies, was up 0.2% during the quarter and 28.1% for the year. The Dow Jones Industrial Average, an index of 30 top businesses, was down 1.9% for the quarter, but up 21.8% for the year. The Russell 2000, which follows small-cap stocks that have an average market capitalization of $1.3 billion, was down 4.7% for the quarter, but increased 46.2% over the 12-month period.
“The elephant in the room is health care,” said Peter Ricchiuti, a finance professor at Tulane University. Ricchiuti tracks regional stocks across the South through the university’s Burkenroad Reports.
Baton Rouge-based Amedisys saw its stock price drop by 43% in the quarter, closing at $149.10 a share. The stock plunged nearly 22% on August 5, the day after the company announced second quarter earnings that fell short of analyst expectations. Shares have steadily declined since then.
“The earnings weren’t bad, but the revenue forecast was not nearly as much as Wall Street thought it would be,” Ricchiuti said.
LHC Group of Lafayette saw its stock price fall 23.2% during the quarter, closing at nearly $157 a share. Like Amedisys, LHC saw its stock price tumble after announcing earnings on August 4. But LHC managed to exceed expectations for the second quarter.
Amedisys and LHC Group are still attractive companies, as seen by their high stock prices. With the aging baby boomer population and the continuing shift toward providing more patient care at home instead of in hospitals, the outlook for home health is bright. And both companies are moving aggressively to buy other home health businesses and expand their footprint.
“They’re not sitting still,” he said.
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The biggest loser during the quarter was Waitr, the Lake Charles-based food delivery service. Shares of the stock were down nearly 53% for the quarter and 73.5% for the 12-month period.
Waitr shares surged in the early days of the COVID-19 pandemic because restaurants were take-out only. But now that vaccines are more widespread, people are more comfortable with going to restaurants.
“People can see the light at the end of the tunnel, but it’s a long tunnel,” Ricchiuti said.
Waitr is also facing competition from larger food delivery services, such as DoorDash, Uber Eats and Grubhub. The company was smart by starting out in markets where there was not a lot of big-city competition. Ricchiuti said.
The big winner during the quarter was Lamar Advertising, which saw its stock price increase by 9%. “The advertising business is a forward looking indicator,” Ricchiuti said. The rise of the share price shows investors have confidence in the economy.
Another stock that saw its shares go up during the quarter was H&E Equipment Services, a Baton Rouge company that specializes in heavy equipment rentals. Shares of the company rose by 5.6% during the third quarter.
H&E’s performance has served as a proxy for how investors think President Joe Biden’s infrastructure bill will pan out, Ricchiuti said. The company also announced in July it was selling off its crane business for $130 million. The business had been hurt by waning demand from oil and gas customers.
“They’re a little more streamlined now,” he said.