Kansas City area investors who stayed close to home had a rough 2015.
Local stocks mostly lost ground as the broad market indexes danced around small gains or losses.
More than half suffered bigger declines than the 2.2 percent drop in the Dow Jones industrial average for all of 2015. Fewer than a dozen could top the 5.7 percent gain of the tech-heavy Nasdaq composite.
The hope for 2016 is that local stocks can deliver better returns.
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Sprint Corp., down 12.8 percent in 2015, had filled the calendar with changes but still faces big questions in 2016 and beyond.
The Overland Park-based wireless company has a new management team, aggressive marketing campaign, and improving network story behind chief executive Marcelo Claure. It has a new funding plan that raised $1.1 billion in cash in mid-December. Management is searching for $2.5 billion in spending cuts, with an untold number of layoffs as part of the bargain.
Those steps address many of the issues that investors want addressed in a turnaround situation, said analyst Paul de Sa with Bernstein Research. Yet fundamental questions remain.
Could there be a merger with T-Mobile US Inc. under a new U.S. administration, will owner SoftBank Group Corp. “double down or cut them loose,” and is Sprint’s ongoing network upgrade going to be “a game changer?” de Sa said.
Each has the potential to impact the company’s immediate future, they will go a long way to addressing its long-term situation.
Shares of railway company Kansas City Southern skidded all year, ending the year 38.8 percent lower and managing a bounce only after the New York Times reported Dec. 21 that it was “a potentially easier target” for takeover. Easier than Norfolk Southern that had rejected offers from Canadian Pacific.
Kansas City Southern, the Times said, was “exempt” from a 2001 rule that essentially thwarts mergers in the industry. It is an old tale, first told in 2001 in a CNN report that labeled the company “an almost immediate takeover target” because of the exemption.
Analyst Jon Braatz at Kansas City Capital Associates said no rumors about a deal circulate. He also notes that Kansas City Southern shares typically trade at premium levels when compared with other rail carriers. But that premium has declined.
The New Year begins with a challenge at Kansas City, Kan.-based Epiq Systems Inc., one of the worst performing local stocks in 2015 with a 23.5 percent drop.
Epiq historically provides services and software to bankruptcy attorneys and class action claims cases. But its has turned heavily to the e-discovery market, helping lawyers electronically handle the flood of documents produced in the discovery phase of cases.
Problem is, e-discovery is a lower profit business and Epiq’s owners aren’t confident in its future, said analyst Peter Heckmann at AvondalePartners LLC in Overland Park.
Push likely comes to shove at the shareholders meeting, expected to be in June. A large stockholder has nominated its own slate of directors seeking to take over the board. Epiq pushed back and the battle has moved to the courthouse.
Cerner shareholders suffered a rare loss in 2015, watching their shares fall 6.9 percent. It was the first down year since 2008 when everything tumbled amid the financial crisis.
Analyst Greg Bolan at AvondalePartners LLC cuts management some slack and says the company’s growth story remains intact. Revenues recently grew less than expected, with the misstep coming in growth of services revenue from existing customers, he wrote to clients.
“However, this comes after years of consistently beating estimates, and we believe every company is entitled to some hiccups,” Bolan wrote.
Cerner’s pass depends on two points: New business remains strong and the “quality of earnings” remains solid. Cerner continues to deliver both, he said.
One local group to watch will be the banks, including Commerce Bancshares Inc., up 2.7 percent in 2015, UMB Financial Corp. down 18.2 percent, and Capitol Federal Financial Inc. down 1.7 percent.
The industry has been under pressure during the era of zero percent interest rate policies at the Federal Reserve. As that era officially ended with a rate hike in December, loan rates edged higher but deposit rates did not, which helps banks’ earnings.
Bankers and their stockholders will be hoping for more Fed help in the coming year.
2015 was rough on local stocks
Dec. 31, 2015, close
Gain/loss for year
Euronet Worldwide Inc.
DST Systems Inc.
Commerce Bancshares Inc.
H&R Block Inc.
Capitol Federal Financial Inc.
Great Plains Energy Inc.
Tallgrass Energy Partners
AMC Entertainment Holdings Inc.
Compass Minerals International Inc.
UMB Financial Corp.
Kansas City Southern
Waddell & Reed Financial Inc.