Bad 2015 for Most Electrical Stocks

Most publicly owned electrical manufacturers, distributors and contractors finished 2015 with stock prices that were well below the major stock indices, and in many cases that were down deep into the double digits (see chart on this page).

The decline in stock prices was most dramatic for several highly regarded former high flyers that had led the market in recent years and had previously been on many analysts’ “Buy” lists. These companies include Cree Inc. (down 22.2% year-over-year (YOY)); Generac Inc. (down 46.7%); W.W. Grainger (down 20.1%); and WESCO (down 42.1%).  It was an utterly forgettable year outside the electrical market, too, as the Dow Jones Index was off 3.8% and the S&P 500 Index was down 2.2% YOY through the first day of trading in 2016. Only the tech-heavy NASDAQ was in growth territory for the year, at approximately 3.7%.

Not all electrical stocks were on the negative side of the ledger. Acuity Brands was up 67% to $233.21 per share at Jan. 4’s close; GE’s shares were up 24.7% to $30.71; and Littelfuse was up 8.5% to $103.23.

Many electrical distributors probably won’t be too happy with the returns that arch-rivals Amazon, Home Depot and Lowe’s enjoyed in 2015. Amazon was up about 107% to an astronomical $636.99 per share; Home Depot was up an impressive 29% to $131.07 and Lowe’s was up about 13% to $75.28.

As a point of reference, it’s generally agreed upon that over the long-term the stock market has averaged 7% growth since the 1920s. In a Bloomberg report, famed investor Warren Buffett, CEO of Berkshire Hathaway, explained the numbers behind this level of return. “The economy, as measured by gross domestic product, can be expected to grow at an annual rate of about 3% over the long term, and inflation of 2% would push nominal GDP growth to 5%,” Buffett said in that article. “Stocks will probably rise at about that rate and dividend payments will boost total returns to 6% to 7%.”

Even Warren didn’t beat the market averages in 2015 — Class “B” shares of Berkshire Hathaway dropped approximately 12% during 2015.