The stock market has been on fire as of late, with the Dow Jones Industrial Average closing at new record highs nine days in a row until Tuesday when the blue-chip index cooled slightly.
Major stock indexes also inched lower on Wednesday, but the Dow remained up 11.57 percent so far this year, while the NASDAQ was up 18 percent and the Standard & Poor’s 500 was up 10.51 percent.
While stocks overall have made sharp gains, share prices for public companies in the Volusia-Flagler area have been more of a mixed bag.
Of the four public companies headquartered in Daytona Beach, just one — TopBuild Corp. — has seen a big jump in its stock price, while another — Consolidated-Tomoka Land Co. — has only seen a modest increase.
Brown & Brown and International Speedway Corp. both have seen the value of their shares inch lower since the start of the year.
Why aren’t stock prices for local public companies keeping up with market trends?
The answer can be found by looking at a company’s bottom line, stock market watchers say.
“Generally, (companies) that are allocating capital wisely, generating solid (returns on capital investment) performance and top-line growth have been trending higher,” said Jaime Katz, an equity analyst with Morningstar in Chicago.
But judging a company by its short-term performance can be short-sighted, said Alexis Lenssen, a certified financial planner who runs the Raymond James office on Seabreeze Boulevard in Daytona Beach.
“A company can have a five-year plan in place, but its stock price may suffer at the point where the company is making a lot of investment for future growth,” Lenssen said. “U.S. investors are hyper-focused on quarterly (earnings) results, which is misguided because business planning takes longer than a quarter to play out.
“Take Brown & Brown for example,” Lenssen added. “We like the stock, but they also just acquired a company, which dilutes their capital. When a company spends a lot of money, that affects its net earnings per share. But companies don’t grow unless they make investments.”
Brown & Brown’s announcement last week of its purchase of Minnesota-based Clairmont Financial Group, is its fourth so far this year.
Another local public company making big investments in its future is International Speedway Corp., which completed a $400 million makeover of Daytona International Speedway early last year and now is developing One Daytona, a major entertainment/retail/dining complex.
ISC officials declined to comment for this article, but Katz, who tracks the company’s financial performance, wrote in an email: “Given the strength of the American consumer at this point and their willingness to spend and put more capital back into the economy, experience-based consumer companies — like International Speedway, or the cruise lines — should be positioned to benefit.”
Mark Patten, the chief financial officer for Consolidated-Tomoka, said it’s important to view a company’s performance in context with its industry.
“A stock might be up 15 percent, but if their sector is also up 15 percent that increase (for an individual stock) might not be fully attributable to that company’s performance,” Patten said. “In our case, if we’re compared to our peers — other land companies and real estate investment trusts — our stock price has performed well.”
Andy Watts, chief financial officer for Brown & Brown said it’s unfair to compare the performance of an individual company against stock indexes such as the S&P 500, which is a “broad-based average of all industries.”
“In terms of the insurance sector, we performed very well in 2016,” he said. “We outpaced the industry and continue to perform well in 2017.”
Brown & Brown generated a record $1.76 billion in revenues last year and appears on pace to top that amount this year. It also produced $257.5 million in net income last year, a 5.7 percent increase over the previous year.
“We don’t worry about day-to-day performance,” Watts said. “We take a long-term view.”
Jerry Volas, the CEO of TopBuild, the nation’s largest installer of insulation for homes, attributes his company’s strong performance in large part to the increase in new home construction and growth of the U.S. economy.
“This is an excellent operating environment for TopBuild,” he said in an email.
How long can this stock market surge last?
“Who knows?” said Lenssen of Raymond James. “We’re always headed for a market correction. We average one (of about 10 percent) every 18 months. … (But) markets don’t correct because they’re high. There’s always some triggering event.”
In terms of the next recession, Katz of Morningstar agreed, but said she doesn’t expect one anytime soon.
“Given the duration of this economic expansion, and historical cycles, it would seem the U.S. would be in turn for at least a modest economic contraction over the next five years at some point, but all cycles are not the same,” Katz wrote in an email. “We don’t prognosticate when a recession might occur.”
Here’s a look at the recent performance of the stocks of 10 public companies with strong local ties, including those with significant operations in the Volusia-Flagler area:
NAME; STOCK SYMBOL; WEDNESDAY’S CLOSE; YEAR TO DATE % CHANGE; 1-YEAR RETURN
Amrep Corp. (parent of Palm Coast Data); AXR; $6.85; -7.68%; +20.81%
Brown & Brown; BRO; $43.81; -2.34%; +19.11%
Brunswick Corp. (parent of Boston Whaler and Sea Ray Boats); BC; $55.20; +1.21%; +10.75%
Consolidated-Tomoka; CTO; $54.92; +2.81%; +12.77%
International Speedway Corp.; ISCA; $35.30; -4.08%; +4.90%
NextEra Energy (parent of Florida Power & Light); NEE; $147.24; +23.25%; +15.92%
Sparton Corp.; SPA; $23.12; -3.06%; +4.14%
Teledyne Technologies; TDY; $147.12; +19.61%; +38.06%
TeleTech Holdings; TTEC; $40.70; +33.44%; +37.13%
TopBuild Corp.; BLD; $58.66; +64.78%; +71.27%