Leading the index higher, rising 4.3% in the month, Halliburton Co. (HAL) ended the month at $35.96. The company announced strong profits, with operating earnings growing 28% and reported earnings almost tripling over year-ago levels due to one-time gains reported as a consequence of the sale of its KBR unit.
“Oil prices continued higher throughout the month,” said Doug May, President of Scout Partners, LLC, “which encourages drilling activity, which is benefiting many companies in the energy sector. After announcing strong earnings, the Jeffries analyst raised his target price and had positive things to say about Halliburton's presence in the Eastern Hemisphere and Latin American operations.” Halliburton is up nearly 16% since the beginning of the year.
Arch Coal (ACI) was again the worst performer in the index, falling -14.1% in July after an equally dismal -13.8% decline during the month of June. The stock, which was up almost 40% at the end of May, has given up all those gains and now sits $0.13 below where it began the year.
“Utility companies have been stockpiling coal, so on the 23rd of July the company acknowledged that production levels would come down and pricing is still soft,” May said. “They cut the earnings guidance to $1.00 to $1.30 for the year, which is well below the Street consensus of $1.53 per share.”
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 6.1% for the year while the overall market has returned +3.9% over the same time period.
Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.
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