Mesa Labs replaces LaFarge in Index

The Scout Partners Index of Western Colorado Stocks rose along with the market in September, +3.63% versus a +3.74% monthly increase for the widely followed S&P 500 stock index (total return including dividends). The 25 stock index focuses on large companies whose operations have a significant impact in Western Colorado. It includes major Mesa County employers such as Wal-Mart, Halliburton, Kroger (City Markets), Exxon Mobil, StarTek, CRH (United Companies), and the Union Pacific Railroad.


Leading the index higher, rising 14.4% in the month, Arch Coal (ACI) ended the month at $33.74. The stock is up +12.4% since the beginning of the year, putting it slightly ahead of the S&P 500 benchmark index, though it has been a particularly volatile year for the stock. Mesa Air Group (MESA) was again the worst performer in the index, falling -21.3% in September and the stock is now down -48.2% for the year.

“Mesa is experiencing both internal and external problems,” observed Doug May, a Grand Junction-based registered investment advisor, “there are increasing signs that we're heading into a recession, or at least very close to one, and fuel prices are rising, which will boost Mesa's cost structure. In addition to that," May added, "they are in the middle of a lawsuit as a result of a Hawaiian Airlines lawsuit which alleges that Mesa conducted some due diligence on Hawaiian Air in 2006, and then turned around and used that confidential information to go start up their own interisland carrier." Mesa Air Group received an unfavorable ruling in September as the judge determined that evidence that Mesa intentionally destroyed can be used in trial.

Mesa Labs (MLAB) replaced LaFarge in the index. LaFarge applied for a delisting from the New York Stock Exchange but retains its Euronext listing, where 99% of its stock trading takes place. Lakewood, Colorado-based Mesa Labs manufactures and markets electronic instruments and systems for industrial applications and hemodialysis therapy. "Adding Mesa Labs to the index helps bolster representation of the health care sector in the index," May notes, "which is an important contributor to the local economy and one that was under-represented in the index."

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 +9.16% for the year while the overall market has returned +9.13% over the same time period.

Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.

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