Leading the index higher, rising 8.2% in the month, Wells Fargo (WFC) ended the month at $36.54. Large diversified financial service companies led the month-end market recovery.
“With all the independent mortgage companies going bankrupt, many investors are looking for the survivors like Wells Fargo to benefit from picking up market share,” said Doug May, President of Scout Partners, LLC, “What makes no sense to me, however, is that we are seeing real problems - nationally - in the real estate market, and I don't see why the big banks like Wells Fargo and BofA are going to be immune to these problems. I think that all the big banks are going to have to increase loan loss reserves before this thing is over, and that is likely to hurt companies like Wells Fargo going forward.” Wells Fargo is up +2.8% since the beginning of the year, which lags the S&P 500 benchmark index.
Mesa Air Group (MESA) was the worst performer in the index, falling -15.2% in August and is down -34.2% for the year.
“Mesa reported a decrease in both available seat miles and revenue passenger miles,” May said, “though passenger enplanements increased year-over-year.” MarketWatch reported mid-month that all U.S. airline shares were being hurt by rising oil prices and that investors had concerns about how deteriorating credit market conditions would impact this traditionally heavily leveraged sector.
Scout Partners equal weighted Index of Western Colorado Stocks is comprised of 25 stocks that hope to reflect, to some degree, business conditions in Western Colorado. Reflecting the local economy, the index has a large (over 30%) concentration in the energy sector, which tends to drive index performance. The next largest sector concentration is in industrial stocks, which comprise over 20% of the portfolio. Local stocks are up +5.3% for the year while the overall market has returned +5.2% over the same time period.
Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.
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