Sell-off hits Columbus
Few local companies came out ahead of stock market plunge
Finding winning stocks in central Ohio in 2018 required digging through a scrap heap of shares of some of Columbus’ best-known companies.
L Brands shares were down 57.4 percent in 2018; Big Lots, 48.5 percent; Scotts Miracle-gro, 42.5 percent; Worthington Industries, 20.9 percent; and Huntington Bancshares, 18.1 percent. The drop in L Brands shares was the thirdworst among the big public companies that make up the Standard & Poor’s 500 index, a benchmark used by most investors to gauge stock market performance.
Think the falloff affected just the big companies? Think again. Many shared the same kind of pain as their bigger counterparts.
Shares of Core Molding Technologies were off 67.2 percent; Installed Building Products, 55.6 percent; and Express, 49.6 percent.
These drops were far more severe than the overall performance for the main stock indices, which in 2018
posted their biggest annual loss in a decade.
The S&P 500 fell by 6.2 percent; the Dow Jones Industrial Average, made up of 30 large companies, dropped 5.6 percent; and the tech-heavy NASDAQ was down 3.9 percent.
For most of 2018, markets did what they had been doing for nearly a decade — rise. The expectation from most analysts was that 2018, backed by a corporate tax cut that boosted earnings for companies, would be another year of gains.
“Investors’ expectations coming in the year were pretty high. The economy was really strong coming into the year,” said Brad Zellar, vice president, trust officer and senior portfolio manager at Newark-based Park National Bank.
Then came October, and the volatility started. Stocks fell off a cliff the last three months of the year. The Dow and S&P 500 posted their worst 2018 local stock performance
Company
Abercrombie & Fitch
Advanced Drainage
American Electric Power
Big Lots
Cardinal Health
Commercial Vehicle
Core Molding
Diamond Hill
DSW
Express
Greif
Heartland Banccorp Huntington Bancshares
Installed Building Products
L Brands
Lancaster Colony
M/I Homes
Park National
Rocky Brands
Scotts Miracle-gro
State Auto Financial Washington Prime
Wendy’s
Worthington Industries
Sources: Bloomberg, Dispatch research
December performance since 1931.
“It’s very difficult for me to recommend stocks going into this year because of the last quarter of 2018. A lot of stocks we follow, wonderful investments, got knocked in half,” said Percentage change 15 percent 1.7 percent 1.6 percent -48.5 percent -27.2 percent -46.7 percent -67.2 percent -27.7 percent 15.4 percent -49.7 percent -38.7 percent
-1.9 percent -18.1 percent -55.6 percent -57.4 percent 36.9 percent -38.9 percent -18.3 percent 37.6 percent -42.6 percent 16.9 percent -31.7 percent
-4.9 percent -20.9 percent
Chip Elliott, senior editor of Columbus-based investment newsletter Market Witch.
Trade tensions with China, signs that global and the U.S. economies are weakening, and rising interest rates get some of the blame for the sudden drop. Political tensions in the U.S. and elsewhere didn’t help.
Or it could be more simple: Stocks had gotten expensive and were due for a pullback.
“We had nine years of really good returns. Most investors are probably OK with that,” Zellar said.
The few local stocks that did well in 2018 tended to be companies with steady, predictable earnings or those rebounding after struggles in previous years.
Food company Lancaster Colony, known for Marzetti dressings and various frozen food products, gave investors a 36.9 percent return last year. Shares of insurer State Auto Financial, in the midst of a turnaround, rose 16.9 percent.
Rocky Brands posted a 37.6 percent return after a solid 2017. Retailers DSW and Abercrombie & Fitch each rose 15 percent.
“Lancaster’s profit is coming from lots and lots of products,” Elliott said. “What you’re looking at is stability.”
“Some of the sectors that tend to be less volatile are where investors tend to go when there is fear in the market,” Zellar said.
Elliott and Zellar think markets could post gains in 2019, but if the first week is any indication, get ready for more rocky times.
Because of the volatility, Elliott is emphasizing stocks that are inexpensive and have a solid dividend, growth potential and strong earnings. Commodities, including soybeans and corn, which have been hammered because of the Chinese trade dispute, should be better, especially if there is a resolution between the U.S. and China, he said.
“I’m just hoping it will get better. I think it will, but it will still be bumpy,” he said.
The drop in the market has reduced valuations to more typical levels, and absent a full-blown trade war with China that spills over into the economy, Zellar thinks markets can post modest gains this year.
“The stock market is pretty attractive right now compared to where we’ve been the last several years.”
mawilliams@dispatch.com @Bizmarkwilliams