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Basch Report
Jax Daily Record Thursday, Jan. 3, 201905:20 AM EST

The Basch Report: A tough year for region's stocks

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With the Dow and S&P 500 falling about 6 percent in 2018, the performance of Jacksonville-area stocks also suffered.
by: Mark Basch Contributing Writer

If you’ve been paying attention at all to the stock market in the final weeks of 2018 (and it would be good for your blood pressure if you didn’t), you know it’s been a tumultuous time for your portfolio.

The overall market’s worst year since the financial crisis 10 years ago ended with both the Dow Jones industrial average and S&P 500 stock index falling by about 6 percent.

The performance of Jacksonville-based stocks reflects the overall market with only six of 20 publicly traded companies finishing with gains in 2018.

However, the poor 2018 performance follows a terrific year for stocks in 2017, when both the Dow and S&P 500 indexes rose more than 20 percent. Even if your portfolio lost value in 2018, the indexes still finished last year with a net gain since the beginning of 2017, so hopefully, you’re still ahead of the game.

With that in mind, you’ll probably feel better if you look at the performance of Jacksonville-based companies over the past two years combined, rather than just for 2018.

It’s something of a mixed bag, with nine of the 20 stocks finishing ahead over the two-year period when you look at their total return – that is, the increase or decrease in their stock prices since the beginning of 2017 plus cash dividends some of them paid out in those two years.

The best performer has been Jacksonville’s largest company, CSX Corp. Even though the stock has dropped from its summer 2018 highs as the market slipped, CSX finished 2018 with a two-year total return of 78 percent. It even managed to produce a return of 15 percent just for 2018.

CSX’s last two years were marked by a management upheaval, as new CEO Hunter Harrison began overhauling operations when he took over in March 2017. The stock rose even before his arrival as Wall Street responded to rumors of his pending appointment in early 2017.

Harrison died in December 2017 but under successor James Foote, the company achieved operating targets for its railroad by mid-2018, about two years earlier than expected. So, the stock has continued to produce positive results.

Fidelity companies produce big gains

The two Jacksonville-based Fidelity companies also produced strong returns over two years: Title insurer Fidelity National Financial Inc. was up 37 percent and bank technology company Fidelity National Information Services Inc. rose 39 percent.

Fidelity National Information Services, or FIS, has been rising steadily since 2016. Fidelity National Financial has a big two-year return despite a sharp drop-off in the stock in the second half of last year, resulting in the stock losing 17 percent for all of 2018.

Investors may be concerned about a decline in homebuying as interest rates rise, which will impact the company’s title insurance business.

However, outdoing both of those companies was Marker Therapeutics Inc., which jumped 41 percent just in 2018 after merging with Jacksonville-based TapImmune Inc. That also gave it a strong two-year gain of 43 percent.

TapImmune was the surviving company in the merger but it changed the corporate name to Marker. The company plans to relocate its headquarters to Houston but Jacksonville remained the home office for 2018.

ParkerVision suffers biggest loss

At the other end of the spectrum, ParkerVision Inc. had the biggest loss for 2018, dropping 87 percent.

The developer of wireless technology had a disappointing rollout of its new in-home Wi-Fi product and its pending patent infringement lawsuits against major mobile technology manufacturers remain in limbo.

ParkerVision closed its second office in Lake Mary and sharply cut its staff in 2018. Its stock dropped below $1 early in 2018 and finished the year trading below 20 cents for much of December. The stock’s two-year loss reached 92 percent.

Stein Mart Inc. also had a big two-year net loss of 79 percent, after a sales slump sent the stock plummeting in 2017.

The stock rebounded in mid-2018 as sales trends turned around but as the overall market fell late in the year, Stein Mart’s stock finished 2018 with a net decline of 8 percent.

GEE Group has fiscal year loss

GEE Group Inc. last week reported a net loss of $1 million, or 9 cents a share, for the fourth quarter ended Sept. 30 and a loss for the full fiscal year of $7.6 million, or 74 cents.

Revenue for the staffing services company was $39.9 million in the fourth quarter, down from fiscal 2017 fourth-quarter revenue of $46.4 million.

The company said revenue decreased because of office consolidations and a reduction in “marginally performing and underperforming staff” in certain areas, as it works to improve operations.

“We made excellent progress in fiscal 2018 and expect to obtain additional operational efficiencies and economies of scale in fiscal 2019, which will lower selling, general and administrative expenses overall and as a percentage of revenue, and significantly improve our bottom line,” CEO Derek Dewan said in a news release.

Dewan said GEE Group will seek to grow organically and through potential acquisitions in the new year, and he thinks economic trends will increase demand for the company’s staffing services.

“We anticipate that the robust employment environment experienced in the last several years will continue as we enter 2019,” he said.

“Secular changes in employment, resulting in more widespread use of ‘on demand’ labor in the ‘gig economy,’ will continue to benefit the staffing industry and GEE.”

GEE Group moved its headquarters from Naperville, Illinois, to Jacksonville in fiscal 2018. While it still has much of its headquarters operations in the Chicago suburb, Dewan and other top executives work from Jacksonville.

Dewan became CEO in 2015 and has been working from Jacksonville after the company, then known as General Employment Enterprises, bought Jacksonville-based Scribe Solutions Inc., which was run by Dewan at the time.

GEE Group said in its annual report the company has 34 branch offices in 13 states. Its total regular employment at the end of the fiscal year was 389.

GEE Group’s stock has been one of the worst performers among Jacksonville-based companies, with a 75 percent drop last year and a two-year decline of 84 percent.

Drone Aviation restructures debt

Drone Aviation Holding Corp. last week said it reached an agreement to eliminate more than 70 percent of its debt by converting $5 million in secured notes to 10.2 million shares of common stock.

Drone Aviation had 9.2 million outstanding shares when it filed its third-quarter report with the Securities and Exchange Commission, so the conversion would double its shares outstanding.

The notes were held by Drone Aviation Chairman and CEO Jay Nussbaum and one of the company’s largest stockholders, Phillip Frost. Including the shares from the convertible notes and warrants to buy additional shares, Frost controlled 6.1 million Drone Aviation shares, according to the company’s annual report.

Nussbaum said in a news release that the reduction in debt will help the company’s expansion plans.

Jacksonville-based Drone Aviation, which produces lighter-than-air aerostats and electric-powered drones, reported revenue of about $1 million and a net loss of $3.9 million in the first nine months of 2018.

Drone Aviation also was one of the worst performers among Jacksonville stocks, falling 46 percent last year and 82 percent over the last two years.

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