Taking stock

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By Cathy Martin and David Mildenberg 

Big proved beautiful for investors in N.C. stocks over the last year, Business North Carolina’s annual list of the state’s 75 largest public companies shows. Most of the companies on the list post stock market valuations of less than $1 billion. But six of the 10 best performers last year were large companies valued at about $5 billion or more, reflecting a preference for safer investments that is typical after years of good returns from the stock market, says Don Olmstead, managing director of Charlotte-based Novare Capital Management, which oversees more than $800 million.

“The telecom, utilities and consumer staples sector have performed really well in the past year. These are defensive investments when there is a lot of uncertainty in the market,” he says. “Plus, we are seven years into this bull market, which is long in the tooth given that average bull markets last about five-and-a-half years.”

But with few other attractive options because of historically low interest rates, investors keep plowing money into the stock market. The S&P 500 gained 3.3% in the year ending June 30, then ticked up another 2.7% in the first half of July. All of the changes cited include dividends.

Piedmont Natural Gas made the biggest gain among the larger-cap companies, rising 75% after Duke Energy made a $4.9 billion merger bid. Regulators are studying the transaction. Cigarette vendor Reynolds American gained 49% as cost savings from its merger with Lorillard kicked in, while real-estate developer Highwoods Properties added 38% and is trading at the highest level since it went public in 1994.

One industry group slammed in the last year was biotechs: Four of the six worst performing stocks were Triangle-area biotech-related companies, each losing more than half of their market value, according to data compiled by Raleigh-based Capital Investment Companies and Rocky Mount-based The Nottingham Company. To be sure, many had posted big increases in recent years. But the perils of innovation and political rhetoric criticizing drug companies sparked the big reversal. Perhaps the most disappointing example is Chimerix, which was valued at more than $2 billion until a failed clinical test disclosed in December sparked a decline of 92%.

Other weak stocks included Bank of America, which dipped 21% as continued low interest rates squeezed margins, and Hanesbrands, down 23% on slowing sales. The Winston-Salem-based apparel company still has one of the state’s best long-term performances, gaining 268% over the last five years.

Reflecting a national trend, the number of public companies is declining because of acquisitions and reluctance by many private companies to convert to broader ownership. Six of the 60 biggest companies on the 2015 list were acquired, including retailers Family Dollar Stores and The Fresh Market. The trend is continuing as Piedmont, Hatteras Financial and Krispy Kreme Doughnuts are acquired by larger companies.

To see a PDF of the Top 75 Public Companies charts click here.

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