SC Stocks Falter: Higher Tides Ahead?
The following information is educational; it is not investing advice.
Regional Management Corporation is a finance company based in Greer. This year its stock has lost over 30% of its value. Fort Mill cleaning product manufacturer Diversey has seen its stock tumble to almost half its January value.
Both are South-Carolina-based companies traded on the New York Stock Exchange, and neither are unique. This year, measures of overall stock market values have fallen by more than 20%, a bear market amid inflation worries and economic cooling.
“Everything is about inflation and interest rates,” Chao Jiang, an Assistant Professor in Finance at the Darla Moore School of Business, explains.
Calling the Federal Reserve the “manager” of the US economy, Jiang explains recent Fed interest rate hikes aimed at curbing high inflation have tightened everyone’s budget.
“Companies have to pay more interest now, and therefore are going to slow down their activity. Also, on the other hand, once you increase rates for people like you and me, we are more likely to save our money in the savings account to earn some more interest,” Jiang says. “Therefore that also slows down the economy because we are not spending that money.”
That slow in activity helps cool down prices. But it’s also often reflected in companies’ stock values, which can become a self-fulfilling prophecy by making businesses wary to spend and expand.
“When the stock price goes down, if you are a manager, you say it’s an indicator for the future,” Jiag continues. “The future doesn’t look very well. So therefore I’m going to scale back investment. Right? I’m going to get prepared I don’t want to open another factory in this market... Even if nothing if nothing is going to happen, because of that indicator, it’s going to hurt their business.”
Rick Hermanns is the CEO of HireQuest, a Charleston-based staffing franchisor, with most of its temp agencies spread across the Southeast. Hermanns co-founded the company in the 90s, but it only went public in 2019.
“We get a little bit of a higher profile, let’s say, by being one of the few public companies in South Carolina,” Hermanns says.
That attention helps in a market where a smaller company like HireQuest needs to stand out for investors to follow and buy its stock.
Hermanns says HireQuest first explored changes to company ownership in 2015, when the company relied entirely on few individual owners for funding. The company’s relative size made the initial decision more difficult: too big to easily sell, too small to easily to go public through an initial public offering (IPO).
After exploring private equity groups, who would send an influx of money to the company in exchange for stints of managerial control, Hermanns was put off by losing power over the company’s long-term initiatives.
But when a reverse merger four years later saw HireQuest combine with an already public company, Command Center, it took the leap. In going public, it exchanged more financial disclosures and fees for the influx of money that the company could put towards long-term growth.
Still, Hermanns acknowledges that the company still faced pushback from advisors against going public at a size where the company remains a “rounding error” compared to giants like Google or Amazon.
“If there’s anybody sitting out there listening that as a decent-sized private company, going public is not nearly as bad as it’s portrayed to be,” Hermanns says.
Since the 2019 merger, where the company began around $4 a stock, HireQuest peaked at almost $25 during the record-breaking 2021 market surge, more recently falling to around $14. Amid the bumpy fluctuations, Hermanns says the company is focused on growth in the years to come.
“Because we’re still, we have a relatively small float, we’re just susceptible to big swings,” Hermanns says.
As for those that own stocks?
“I never hear the fear factor when we open our meetings,” Fred Rhamy Jr., President of the Model Investment Club of Better Investing’s South Carolina Chapter, says.
Better Investing is a national nonprofit that works to make investing accessible to people without outside stockbrokers through online tools and local meetings. Rhamy’s message to club members and visitors alike echoes Hermann’s eye towards the future. Now is generally a good time to buy stocks at a low price, waiting for market growth to sell high.
“And I used the ebb and flow of the business cycle, but I used the analogy of high tide versus low tide,” Rhamy explains. “And if you go out there look at high tide, you’ll notice that all boats rise. And when you go into the low tide, the reverse happens.”
In July, stocks finally saw an upswing, a sign of faith in the Fed’s ability to steer the economy away from a recession and towards those higher tides.