- 2014 - January - 6th -

It was a good year for about half of the public companies based in Jacksonville that beat the market

By Mark Basch, Contributing Writer

In a normal year, you would feel good about a stock that rose 25 percent, but 2013 was not a normal year.

The major stock indexes all reached record highs and produced huge gains last year. The Dow Jones industrial average rose 26.5 percent, the Standard & Poor's 500 rose 29.6 percent and the Nasdaq Composite index jumped 38.3 percent. So to say you had a good year, your stock had to beat those lofty gains.

At least some investors in local stocks should feel good. About half of Jacksonville-based public companies did beat the market in 2013 with total returns of more than 40 percent. The total return includes not only the gain in market price of the stock but also dividends paid last year.

The best returns came from three companies that don't pay dividends but more than doubled in price, including two that kept themselves in the headlines for much of the year.

ParkerVision Inc. had the biggest gain with a 124 percent rise. The company, which has been developing wireless radio technology for years with rarely any revenue to show for it, has zigzagged in price over the past two decades as investors try to gauge the company's potential.

Last year produced a major victory for ParkerVision when a federal court jury awarded the company $173 million in its patent infringement lawsuit against Qualcomm Inc., although the company was hoping for more.

ParkerVision is seeking additional royalties for future use of its technology, and Qualcomm will be trying to overturn the court verdict on appeal, so the final result of the lawsuit is still up in the air. We could continue to see ParkerVision's stock price zigzag in 2014 as investors bet on the results.

Atlantic Coast Financial Corp. rose 115 percent as it stayed in the news all year. The stock rose in the first half of 2013 because of an acquisition proposal for the banking company.

That offer was rejected by shareholders in June but the stock kept much of its gains after its management team was overhauled and the company was able to raise additional capital.

The third company to double in price was Web.com Group Inc., which didn't make big news headlines in 2013 but raised its profile with new marketing initiatives. That included a 2012 deal to sponsor the PGA Tour's second-level tour, now branded as the Web.com Tour.

At the other end of the spectrum was Global Axcess Corp., which filed for Chapter 11 bankruptcy and sold off its remaining assets in the automated teller machine and DVD kiosk businesses. Shareholders were left with nothing in the Chapter 11 reorganization.

Beyond that, the big loser was Body Central Corp., which dropped 61 percent. The women's fashion retailer's stock began falling in mid-2012 when sales slumped, but the stock dropped further in the second half of 2013 after Body Central reported a surprising net loss.

Analysts say Body Central's turnaround will take time, and many are projecting another net loss in 2014.

Analyst sees more awareness for Stein Mart

Jacksonville's other fashion retailer, Stein Mart Inc., headed in the other direction in 2013 with an 80 percent total return, which includes dividend payments. That was fourth-best among Jacksonville-based companies.

Stein Mart's stock rose on continued growth in comparable-store sales, which rose 3.9 percent in the first 10 months of its current fiscal year. Comparable-store sales, which are sales at stores open for more than one year, are a key indicator of a retailer's performance.

Avondale Partners analyst Mark Montagna said in a report last month that Stein Mart's "comp revival" resulted from several factors, including increased brand-name offerings, getting merchandise "back to its roots," its de-emphasis on coupons and the public's endorsement of off-price retailers.

Stein Mart's stock was actually doing better in November before the company forecast a lower gross profit margin for the fourth quarter. Several analysts said the market overreacted to that forecast but Stein Mart's stock fell from a 52-week high of $16.17 before the announcement to $13.45 at the end of the year. If the stock had maintained that high price, its return for the year would have been 116 percent.

Montagna went on an investor road trip before the holidays with Stein Mart Chief Financial Officer Greg Kleffner and Director of Investor Relations Linda Tasseff and came away with the impression that Stein Mart, while well known in Jacksonville, is still something of a mystery to many investors.

"There is a general lack of awareness of Stein Mart at the investment hubs of NYC and Boston since the closest store to Manhattan is in Watchung, N.J., and (the closest to Boston) is 31 miles west of Boston in Westborough, Mass.," Montagna said in his report after the two-day trip.

"Investors who already had a deep knowledge of the story appeared to fully understand and endorse the opportunity. Investors new to the story were brought up to speed, seemed impressed, and indicated they would dig deeper," he said.

Montagna said Stein Mart will have an opportunity to gain more recognition next week when it makes a presentation at the ICR XChange, a major annual investor conference for consumer-related stocks in Orlando.

"This will be Stein Mart's first time presenting at ICR. With such low investor awareness, Stein Mart should see a significant uptick in interest," he said.

Montagna's report also had an interesting outlook on Stein Mart's future. He doesn't expect the company to be sold anytime soon and that kind of speculation "should not be a premise for investing in the story," but private equity firms could be interested, he said.

"Stein Mart fits the profile that private equity firms seek. It has a proven model, has store growth, is still in margin recovery mode, and generates free cash," he said.

The future is basically up to Chairman and CEO Jay Stein, who controls about 35 percent of the company's stock.

"Clearly at some future date, Jay will have to take action for estate planning purposes," Montagna said.

"He is an energetic 68 years old and has no family members in the business nor any expectation that a family member will ever be involved. He is heavily involved with merchandise and marketing," he said.

Montagna thinks someone would have to offer a per-share price of at least the mid-$20s before Stein would even consider a sale.

FNF and LPS gain as merger closes

Lender Processing Services Inc. was predictably a big gainer in 2013 after the company agreed to a buyout by Fidelity National Financial Inc., a deal that actually closed on the second day of 2014.

FNF also produced a strong gain, which was good for LPS stockholders because they are getting a combination of cash and FNF stock in exchange for their LPS shares.

The original agreement in May put the value of the deal at $33.25 a share for LPS stockholders.

After several amendments to the structure of the deal, the final value of the deal was pegged at $37.14 a share for LPS stockholders, consisting of $28.10 in cash and $9.04 in FNF common stock.

That value was based on an average trading price of $31.459 for FNF in the days leading up to completion of the merger.

As things turned out, FNF's stock reached $32.25 at the close on Thursday, when the deal was completed. Since LPS stockholders are getting .28742 shares of FNF for every LPS share, that means the value of FNF stock they are getting was $9.27 per LPS share when the deal closed, making the total value $37.37 a share for LPS stockholders.

LPS was spun off from Fidelity National Information Services Inc., or FIS, in 2008. FIS was itself spun off from FNF in 2006.

While LPS produced a 53 percent return for shareholders in 2013 and FNF produced a 41 percent return, FIS actually outdid both of them with a 57 percent return.

There really weren't any major news events for FIS during the year, just a strong earnings performance.

Moody's Investors Services said Friday that LPS' prior ownership by FNF should be an advantage for the companies.

LPS "will add diversification of earnings and unregulated cash flows to FNF; however, it will also carry a significant debt burden," Moody's said in a news release.

Still, Moody's affirmed FNF's senior debt rating of Baa3 after the merger, saying the debt remains manageable and "integration risk is reduced given FNF's prior ownership and its good track record in integrating acquisitions and extracting expense efficiencies."

FNF and LPS have not revealed details of any cuts that could be made in their joint operations after the merger.

Year-end performances by public companies

The 2013 total return for Jacksonville-based public companies. The total return is calculated by dividing the increase or decrease in stock price – plus cash dividends paid – during the year by the stock price at the end of 2012.

Atlantic Coast Financial115%
Web.com Group115%
Stein Mart80%
Fidelity National Information57%
Lender Processing Services53%
Patriot Transportation46%
Fidelity National Financial41%
EverBank Financial24%
Landstar System10%
Regency Centers2%
Fortegra Financial-7%
Jacksonville Bancorp-21%
International Baler-32%
Body Central-61%
Global Axcess-100%


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