News & Our Thinking

The S&P 500 suffered its worst first half of a year since 1970, falling 21%.

So it’s not a surprise that St. Louis-area company stocks declined by 13% through the second quarter this year, according to the equally weighted Argent St. Louis Stock Index.

The local drop, however, is less than that of the S&P 500 and two other national indexes, wrote Ithiel Turrado, small cap portfolio analyst at Clayton-based Argent Capital Management, in a commentary on his findings. The NASDAQ was down 29.5% and the Dow Jones Industrial Average fell 14.4%.

“Same as last quarter, the St. Louis Index benefited from its large active weight in consumer staples, a notoriously defensive sector, and its large underweight in technology, where frothy valuations have violently come down,” Turrado wrote.

The St. Louis Stock Index consists of the stocks of 36 companies based in the area or with a larger presence here.

The second-quarter’s contrast with the first three months of the year is sharp. In the first quarter, the Argent St. Louis Stock Index declined by 2.9%, compared with the S&P 500 losing 4.9% of its value, the NASDAQ falling 9.1% and the Dow Jones Industrial Average declining 4.6%.

Turrado noted that Wall Street started the year mainly concerned about inflation and high valuations in part of the market caused by “excessive appetite for risk” during the pandemic.

“Now investors are also concerned that the U.S. is sailing toward a recession. The Fed has communicated its plans to aggressively shrink in the balance sheet in an effort to bring inflation down to less disruptive levels, all without tipping the economy into the recession. Unfortunately, the Fed’s track record in this domain is rather poor and if history serves as a guide, recessionary fears are well justified,” Turrado wrote.

No S&P 500 sector beyond energy generated a positive return in the first half of the year, with consumer discretionary and technology being the laggards, according to Turrado.

The top five performers in the Argent St. Louis Stock Index in the first half of 2022 are:

Peabody Energy (BTU) – up 112%

Arch Resources (ARCH) – up 65%

Caleres (CAL) – up 16%

Spire Inc (SR) – up 16%

AT&T (T) – up 15%

The presence of well-positioned energy companies in the index contributed to it declining less than the three national indexes, Turrado wrote.

Peabody Energy’s stock price declined during the second quarter, but was still up 112% since the beginning of the year.

“While the company is facing many of the supply chain headwinds as other heavy industrials, the demand for coal continues to grow especially in the more profitable sea-born markets,” Turrado wrote.

Arch Resources, the other coal company in the index, delivered record quarterly net income for the second straight quarter. The company announced an $8.11-per-share dividend, which is expected to increase in coming quarters in an effort to return capital to shareholders.

The third-best performing stock in the local index year to date was shoe retailer Caleres, with its stock price appreciating 16$ in the first half of the year. The company operates Fam0us Footwear stores and has a well-diversified bran portfolio that includes names like Allen Edmonds. Turrado wrote that Caleres saw its stock price jump 30% after reporting strong first-quarter results.

The bottom five performers in the Argent St. Louis Stock Index midway through this year are:

Galera Therapeutics (GRTX) – down 72%

Stereotaxis (STXS) – down 70%

Benson Hill (BHIL) – down 62%

Nerdy Inc (NRDY) – down 53%

1847 Goedeker (GOED) – down 49%

Turrado said Galera Therapeutics continues to struggle with volatility around the Food and Drug Administration approval process for Avasopasem, which could be the first FDA-approved drug for dealing with severe oral mucositis — a serious side effect of typical radiotherapy treatments in patients with head and neck cancer.

Medical equipment company Stereotaxis launched a new product used in endovascular procedures during the pandemic and the adoption had been promising in 2021. However, the impact of Covid-19 on supply chains and hospital finances have sent shares of the company down more than 70% year to date, according to Turrado.

The third laggard in the St. Louis Index was Benson Hill, with a price decline of 62% year to date as investors’ sentiment around companies that went public through special purpose acquisition companies continues to deteriorate, Turrado wrote.

SPACs, sometimes referred to as “blank check” companies. are formed to raise capital through an initial public offering with the intent of using the proceeds to acquire or merge with an existing private company and take it public. Depending on the index or exchange-traded fund. SPAC stocks are down between 40% and 50% year-to-date, Turrado wrote.