Energy sector drags down Oklahoma stocks in 2017
In a year when the Dow Jones industrial average surged more than 25 percent and the S&P 500 gained almost 20 percent, two-thirds of Oklahoma stocks lost ground in 2017.
Oklahoma’s publicly traded companies are heavily weighted to the energy sector, which struggled on Wall Street this year despite strengthening commodity prices that led to returned profitability.
“Some of it is that investors are buying success stories,” said Jake Dollarhide, president of Longbow Asset Management Co. in Tulsa. “Investors are shunning energy, knowing how volatile it has been and how the bad times are still fresh in people’s minds. The energy industry is going to have to prove itself for several more quarters or a few years to turn that around.”
Much of the broader market’s gains have been in a small number of stocks, including technology firms like Amazon, Netflix, Facebook and restaurant chains like McDonald’s and Starbucks.
“Investors are shunning typical dividend plays like health care,” Dollarhide said. “Instead, they’re buying the momentum stocks.”
While most Oklahoma publicly traded companies lost value in 2017, eight companies had double-digit percentage gains.
Tulsa-based bookseller Educational Development Corp. led them all with a more than 90 percent gain to $18.95, up $9 on the year. The firm was backed by an improved logistics system and its ability to meet holiday shipping demand.
Educational Development stock was hit in late 2016 when the company announced that it would not fulfill all shipments before Christmas, but the company since upgraded its warehouse and shipping operations.
“Our shipments during the third quarter were able to keep up with our incoming orders for the first time in several years,” CEO Randall White said in a statement earlier this month.
Unlike many book publishers, Educational Development is shipping only through its own
network and has chosen not to work with Amazon.
“This was a languishing penny stock 15 or 20 years ago, but it’s had an amazing turnaround story,” Dollarhide said. “They’ve had a huge expansion here in Tulsa and certainly have benefited from a stronger economy and a nice story overall.”
Oklahoma City payroll technology company Paycom had by far the largest dollar growth and the No. 2 percentage change, adding $34.84, or 77 percent, to $80.33 a share.
“Paycom is our Silicon Valley. It’s been a giant success story,” Dollarhide said.
Paycom provides payroll and human resources products and recently has begun offering management courses as well. Earlier this year, Paycom placed fourth on Forbes magazine’s 2017 Fast Tech 25, a list of America’s fastest-growing publicly traded technology companies.
One of the few topperforming Oklahoma energy companies is Oklahoma City-based Mammoth Energy Services Inc., which gained $4.43, or 29 percent, to $19.63 a share.
Since Mammoth’s October 2016 initial public offering, the company has expanded rapidly, buying suppliers for hydraulic fracturing along with companies in other similar industries like electric utility services. The company is in the midst of a $200 million, 120-day contract to help restore power in Puerto Rico following Hurricane Maria.
“Not only do they have the beefy menu of onshore, unconventional oil and natural gas play, but they also have diversity outside of oil and gas,” Dollarhide said. “Investors recognize that and understand their story.”
While the bottom portion of the Oklahoma stock list was dominated by energy stocks this year, the worstperforming stock was Pryor-based Orchids Paper Products, which makes toilet paper and other related products. The stock shed $13.38, or 51 percent, to $12.80.
“It was not a good year for materials companies,” Dollarhide said. “Orchids is in a boring, non-sexy business, and it doesn’t pay a dividend. It’s struggled to find an audience.”
Rounding out the state’s worst performers are a trio of energy firms that each lost more than 40 percent of their value in 2017.
Oklahoma City-based Chesapeake Energy Corp. tumbled $3.06, or 44 percent, to $3.96 a share. Tulsa-based Cypress Energy Partners gave back $4.55, or 43 percent, to $6 a share. Oklahoma City-based Gulfport Energy Corp. dropped $8.88, or 41 percent, to $12.76 a share.
All three companies historically have focused on natural gas production, which has seen sales prices plateau even as oil has rebounded this year.
“Even though there’s been a real dedication to deleverage and to go from 100 percent natural gas to more of a 50-50 mix, that doesn’t happen overnight,” Dollarhide said. “It doesn’t happen in two or three years in some cases. This energy market is about the haves and the have-nots.”
Another six energy companies shed more than 20 percent of their value in 2017: NGL Energy Partners LP, SemGroup Corp., Blueknight Energy Partners LP, Laredo Petroleum Inc., Matrix Service Co. and Midstates Petroleum Co.
“It’s been a slow recovery for the energy sector,” Dollarhide said.
Overall, the national stock market had its strongest year since 2013. More gains are likely in 2018, Dollarhide said.
“I don’t look for another 15 or 20 percent gain next year, but I think it will be up 8 or 9 percent, and there’s nothing wrong with that,” he said.
“At some point, the Fed will raise interest rates to a point where it will cut off the bull market at its knees. But I don’t see that in 2018, and it might not even be in 2019.”