Tulsa world 2016 Investment Guide

SUNDAY, SEPTEMBER 25, 2016 INVESTMENT GUIDE 2016

TAKING STOCK A breakdown of the stocks of local interest INSIDE Energy sector 6 Industrial sector 8 Utility/ telecom sector 10 Consumer sector 12 Finance sector 14

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THE PICKERS The following Tulsa-area investment advisers, stockbrokers and money managers provided their picks for this year’s guide.

James Arens II The Trust Company of Oklahoma

Andrew Boyd Gibraltar Capital Management

Jake Dollarhide Longbow Asset Management Co.

George Foldesy Commerce Bank

Keith Goddard Capital Advisors Inc.

Jim Huntzinger BOK Financial Corp.

Ying Qi Fredric E. Russell Investment Management Co.

Fredric E. Russell Fredric E. Russell Investment Management Co.

Dan Safranek

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Investing isn’t just for the elite – it’s for all With this year’s Investment Guide, we decided to make some changes that we hope will help you throughout the year.

Our goal is to focus on some Oklahoma companies and national irms with significant local operaSamuel tions to help Hardiman our readers understand Tulsa what makes World them valusam.hardiman@ able. We also tulsaworld.com want you to understand why investing is important to your inancial future.

Investing is for everyone For almost half of the people in the U.S., the stock market isn’t much more than a page full of tiny numbers in the newspaper or the sound of a bell on the evening newscast. Only about half of Americans owned stocks in

2016, according to a Gallup poll. That’s down from more than 60 percent for most of the decade before.

When the Great Recession hit, the value of the market declined and so did the number of Americans investing.

The belief in stocks as the best long-term investment also declined. A 2013 Wall Street Journal poll showed that only 21 percent of Americans had a favorable view of Wall Street. Wall Street was so unpopular that it became a prominent feature of the populist message of both Bernie Sanders and Donald Trump in their presidential bids three years later.

In Tulsa, activist board members concerned about maximizing the value of Williams Cos. almost sent one of the city’s legacy companies packing to Texas. And more recently, the Williams board said it’s still interested in maximizing shareholder value in response to a potential suitor saying it was calling of the chase.

Hedge funds and institutional investors wield tremen-

dous power over companies, irms that are the livelihood of ordinary people. Investing in local stocks or stocks overall isn’t going to lessen that power overnight — or maybe ever. But it’s a way of having a stake in the game and beneiting, even in a small way, from the proits of companies you know about and interact with every day.

Where local companies fit in Every company that people interact with every day is competing against another company either indirectly or directly. Wal-Mart and Macy’s are similar to each other. Each of them is very diferent from AAON, Berkshire Hathaway or BOK Financial.

To compare stocks, you need to come as close to apples to apples as possible.

So we broke the stocks of local interest into sectors, loosely based of the 10 sectors that make up the S&P 500. We combined some of the sectors to give our local investment professionals more than three

stocks to choose from in the same areas.

There’s another reason for us breaking it up that way, too: Diversiication. Diferent sectors of the economy do well at diferent times. For most of the past year, energy stocks have been in the gutter because of a supply glut. That means cheap fuel for airplanes. Most airline stocks have risen sharply over the past 24 months. It pays to put your eggs in diferent baskets and shule the mix at different times.

Our pickers chose stocks within each of the ive sectors that they think have the most favorable outlook long-term.

We tabulated those rankings and produced ive stocks for each sector.

We don’t favor one over any of the others, and they aren’t ranked 1 through 5. The picks are just a sampling to serve as a reference before you decide to invest yourself or sit down with someone whom you’ll pay to do it for you.

Samuel Hardiman 918-581-8466 Twitter: @samhardiman

Safranek and Associates LLC

Sid Shupack First State Investment Advisors

Qian Zhang Fredric E. Russell Investment Management Co.

STAFF Supervising editor: Colleen Almeida Smith Project editor: Samuel Hardiman Presentation editor: Tim Chamberlin Writers: Samuel Hardiman, Rhett Morgan, Casey Smith, Adam Daigle and Colleen Almeida Smith Graphics and design: Steven Reckinger Cover illustration: James Royal

4 books that will help make you a better investor Looking to start investing or build a base of knowledge? Here are four books to help you get your feet wet or sound more intelligent the next time you talk to your broker.

The Intelligent Investor by Benjamin Graham (Harper Business, $22.99).

Before Warren Bufett, there was Graham, who is widely regarded as the father of modern investing. Originally published in 1949, this 600-plus page tome isn’t full of $5 dollar words and complicated charts. It just explains, clearly and

simply, the strategies behind investing and the potential returns a wise and shrewd investor can potentially receive.

One Up on Wall Street

by Peter Lynch (Simon & Schuster, $17). Lynch is another one of those guys who investment professionals say belongs on the “Mount Rushmore” of investors.

Lynch has what one professional described to the World as a “touchy, feely” approach, compelling readers to see if they can ind investments by what they see people buying in stores.

You might recall that Kevin Spacey E-Trade commercial with the inger shoes as you read this book.

The Big Short by Michael Lewis (W.W. Norton & Co., $15.95). It’s the book behind the movie that made Americans care about the root causes of the Great Recession. Of all the books on this list, Lewis’ book is the most readable and fun. However, he still has a serious message — the housing crisis was caused by speculation and not investing. The difference between those two is something money manag-

ers love to harp on.

The Great Crash 1929

by John Kenneth Galbraith (Mariner Books, $14.95).

What’s a book about the most recent stock crash without the context around the biggest? Not much.

That’s why we included a book about the stock market crash that precipitated the Great Depression.

Galbraith is eloquent and clear — explaining the poor investment practices and irrational nature of the market.

— SAMUEL HARDIMAN, Tulsa World

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Use the stock page as your guide

By Samuel Hardiman Tulsa World

The Tulsa World runs the results of about 70 stocks each day under “Stocks of Local Interest.”

Some of them are companies that are headquartered in Oklahoma, such as BOK Financial. Most are national or international corporations that may have been headquartered in Oklahoma at one time, such as ConocoPhillips, or irms that have signiicant operations in Oklahoma. Macy’s is one example.

Key pieces of what makes these irms money are here in Oklahoma, which means their employees are here, and they pay taxes here.

What we print everyday and how it can help The World, like most papers, prints close to a dozen data points next to its stocks of local interest.

Those tiny numbers show how much the price of one share of a company has luctuated over the past year, what it closed at the previous day, how much money it makes compared to how much one share is worth and how much of its proits it gives back to shareholders per share each year.

They’re the boring version of the AP Football top 25. Both say much of the same things about what people’s opinion of a company or a football team is. Stocks aren’t traded at exactly how much they’re worth. Just like football teams aren’t ranked that way. They’re ranked based on how people in the marketplace perceive them.

A blue-chip, well known stock like Apple is

Stocks of local interest • AAON Inc. AAON • AT&T Inc. T • ADDvantage Tech AEY • Alliance Holdings GP AEY • Alliance Resource AHGP • American Airlines AAL • Amer Elec Power AEP • BOK Financial BOKF • BP PLC BP • Baker Hughes BHI • BancFirst Cp OK BANF • Bank of America BAC • Berkshire Hathaway A BRK/A • Berkshire Hathaway B BRK/B • Blueknight Energy BKEP • Boeing Co. BA • Brunswick Corp. BC • Chesapeake Energy CHK • Chesapeake Granite CHKR • Chevron Corp. CVX • Cimarex Energy XEC • Cmrce Bncsh MO CBSH • ConocoPhillips COP • Contl Resources CLR • Devon Energy DVN • Dilliards Inc. DDS • Educational Devel EDUC • Exxon Mobil Corp. XOM • Halcon Resources HK • Helmerich & Payne HP • Holly Frontier Corp HFC • Honeywell Intl HON • IBM IBM • JPMorgan Chase & Co. JPM • Kimberly-Clark KMB

similar to a program like Alabama, more likely to be forgiven for a mistake than a little-known company such as Educational Development Corp. However, that stability often means that a well-known stock won’t soar as high as one that isn’t well known — say Houston jumping up nine spots after beating Oklahoma.

Undefeated teams can plummet after a loss.

New, promising companies can topple in market value after a bad quarter.

When you see the range of how far the stock has risen and fallen over the past year in the paper, it’s

• Laredo Petro LPI • Leucadia Natl LUK • Level 3 Commun LVLT • Magellan Mid Ptr MMP • Matrix Service MTRX • Mid-Con Energy MCEP • NGL Energy Partners NGL • Noble Corp plc NE • OGE Energy OGE • ONE Gas Inc. OGS • Occid Petl OXY • ONEOK Inc. OKE • ONEOK Partners OKS • Orchids Paper Pdts TIS • Parker Drilling PKD • Phillips 66 PSX • Phillips 66 LP PSXP • Prosperity Bcsh PB • Rockwell Automation ROK • Rose Rock Midstream RRMS • SemGroup Corp SEMG • Sonic Corp SONC • Southwest Bncp OKSB • Spirit AeroSystems SPR • Terra Nitrogen TNH • Tyson Foods TSN • Unit Corp UNT • US Cellular USM • Valmont Ind VMI • Verizon Comm VZ • WPX Energy WPX • Wal-Mart WMT • Whirlpool WHR • Willbros Group WG • Williams Cos WMB • Williams Partners WPZ

a sign of how much investors perception of them has changed. Sometimes, like with football teams similar to LSU or USC, it can rise without any corresponding success.

There’s a way to pick out the contenders from pretenders. It’s sort of like the internal calculations we do when looking at the CFB box scores each week, tracking how much teams won or lost by. It’s the second number from the end and it’s called Price to Earnings ratio — a measure of how high the stock is valued vs. how much money it’s making.

The higher the ratio,

the more of investor’s optimism is typically cooked into the company’s share price.

Diferent types of stocks are valued diferently by the market and will be consistently valued higher than some that have better earnings.

When looking at the price of a share, it can help to compare them to stocks that do a similar thing and belong to the same sector of the economy.

Sectors are like conferences, sort of To further help investors make sense of the various companies the S&P 500 sorts irms into sectors. Multiple inancial websites show comparable companies. We decided to do the same with this year’s investment guide, combining the stocks of local interest into ive general sectors.

It’s also how wealth managers and investment professionals make decisions. They judge companies on their strength compared to other companies that do similar things and how much market share they have.

The goal with our sectors is to help people get in the mindset of comparing stocks in a similar or the same industry.

They’re far from scientific, however.

Most stocks in the stocks of local interest are energy stocks, so while the energy sector was easy to put together, the other four were not.

Samuel Hardiman 918-581-8466 sam.hardiman@tulsaworld.com Twitter: @samhardiman

Among mutual funds that invest in a mix of large-cap stocks, just 15 percent of actively managed funds managed to beat index funds over the decade through June 2016, according to Morningstar. RICHARD DREW/AP file

Reason behind exit from managed funds

By Stan Choe Associated Press

NEW YORK — It’s perhaps the most contrarian move in investing today: Trust a stock picker.

Investors have been dumping funds run by managers who try to beat the market, and they’re pouring money instead into those that track the Standard & Poor’s 500 or other indexes. In July alone, $44 billion left actively managed stock funds, and nearly $41 billion went into comparable index funds.

To understand why, have a look at the mutual fund scorecard. Index funds have generally done better than actively managed ones over the last one, ive and 10 years.

Among mutual funds that invest in a mix of largecap stocks, just 15 percent of actively managed funds managed to beat index funds over the decade through June 2016, according to Morningstar.

It’s not just stock pickers catering to mom-and-pop investors who are struggling. Hedge funds, which

invest for the uber-wealthy and big institutions, have also been lagging behind index funds. Through July, they were on pace for a third straight year of lower returns than either an S&P 500 index fund or an investment that tracks a Barclays bond index, according to industry researcher HFR Inc. But what if you can’t stand the idea of being just average? Some investors are conident they can pick the active manager who will beat the market. Other, more skittish investors would like the comfort of having a manager who can limit losses when market indexes are tumbling.

That’s why some actively managed funds are still pulling in money. American Funds, the second-largest fund family by assets, is unabashedly in favor of active management. It attracted a net $5 billion in investment in the irst seven months of this year.

Even the biggest indexfund provider, Vanguard, has actively managed funds of its own, and they’ve been drawing dollars, too.

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ENERGY SECTOR A healthy financial position with little debt is a key element in this sector

By Casey Smith Tulsa World

Employees Chris Wittner (left) and Gary Glass prepare for the ribbon-cutting ceremony in July at Chevron Phillips Chemical’s new polyethylene pilot plant in Bartlesville. The petrochemical company is a joint venture between Chevron Corp. and Phillips 66. JAMES GIBBARD/Tulsa World file

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The past two years have been rough for the energy industry, marking the settling in of one of the industry’s infamous downturns that many say rivaled or surpassed the weak markets of the 1980s.

However, many in the industry, including the CEO of Helmerich & Payne, are seeing signs of recovery.

John Lindsay, the head of the Tulsa-based exploration and production company, commented in an earnings news release in late July that despite setbacks, there were signs of optimism in the market.

“In May, the BHI (Baker Hughes) U.S. land rig count troughed at 380 rigs, and has since increased from what everyone hopes was the absolute bottom of this market cycle,” Lindsay said. “Recently, some E&P companies have announced budget increases and rig count additions.

It is a positive sign, but many still remain on the sidelines.”

It’s because of the innately unsettled nature of the energy industry that money manager Fred Russell said he and his team insist on companies with good financials and little debt.

“We love the companies that have strong financial position with little debt in the volatile sector,” said Russell, the founder, CEO and chief investment strategist of Fredric E. Russell Investment Man-

Energy Sector CHEVRON CORP. What they do: Multinational with upstream, midstream and downstream oil and gas operations Number of employees: 61,500 Ticker symbol: CVX (NYSE) Price to earning ratio: minus-0.40 Earnings per share in second quarter 2016: 0.78 2015 dividend: 4.28 HELMERICH & PAYNE What they do: Oil and gas products/services Number of employees: 6,738 Ticker symbol: HP (NYSE) Price to earning ratio: minus-583.47 Earnings per share in second quarter 2016: minus-0.20 2015 dividend: 2.09 PHILLIPS 66 What they do: Pipeline transportation of oil and gas and retail sales Number of employees: 14,000 Ticker symbol: PSX (NYSE)

agement Co. “Because in a volatile industry, a lot of companies are in trouble. Companies with strong financial posi-

Price to earning ratio: 13.43 Earnings per share in second quarter 2016: 0.93 2015 dividend: 1.82 CONOCOPHILLIPS What they do: Oil and gas exploration Number of employees: 15,900 Ticker symbol: COP (NYSE) Price to earning ratio: 21.17 Earnings per share in second quarter 2016: minus-0.86 2015 dividend: 0.75 BAKER HUGHES What they do: Oil and gas products/services Number of employees: 43,000 Ticker symbol: BHI (NYSE) Price to earning ratio: minus-11.07 Earnings per share in second quarter 2016: minus-2.08 2015 dividend: 0.51

tion can take advantage of buying cheap assets from these troubled companies.”

Helmerich & Payne is

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ENERGY SECTOR one of the companies that Russell said he likes, citing the corporation’s cautious approach to debt and its belief in maintaining a good cash low.

In the past three quarters in iscal year 2016, H&P has been increasing its free cash low quarter by quarter to $395.9 million for the period ended June 30, and during the same quarter it had a debt to equity ratio of only 0.11.

Chevron Corp. also ranked in the top ive for the energy sector in this year’s guide.

The integrated energy company does virtually everything in the industry, including exploration, production and transportation of crude oil and natural gas; reining, marketing and distribution of transportation fuels and lubricants; manufacturing and selling petrochemi-

cals and additives; generating power and producing geothermal energy; and developing and deploying technologies.

Chevron reported fullyear 2015 net income of $4.6 billion for 2015 with sales and operating revenue of $129.9 billion and a 2.5 percent return on capital.

The company said in its annual report that in light of the diicult mar-

ket conditions, it took signiicant actions to reduce costs and improve net cash low.

Also at the top of the energy sector were diversiied energy manufacturing and logistics company Phillips 66, which returned $2.7 billion of capital to shareholders in 2015; exploration, production and transport company ConocoPhillips, which decreased capital spend-

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ing by 41 percent and reduced operating costs by 14 percent in 2015; and oil ield services company Baker Hughes, which reduced capital spending by 46 percent in 2015 to $1 billion.

Oklahoma-based companies Phillips Petroleum and Conoco merged in 2002 and moved the new company’s headquarters to Houston. ConocoPhillips spun of its down-

stream assets as Phillips 66 in 2012.

Baker Hughes has several sites in the Tulsa area, including a Centrilift plant in Claremore that employed more than 1,000 workers in 2015.

Casey Smith 918-732-8106 casey.smith @tulsaworld.com Twitter: @casey_garrison

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INDUSTRIAL SECTOR Companies that move to innovation and automation could benefit in long run

By Casey Smith Tulsa World

The industrial sector is in the midst of a transition period into the digital age, said Qian Zhang, investment manager for Frederic E. Russell Investment Management Co. “The companies in the industrial sector focus on software-based innovation and automation in recent years,” Zhang said. “We see increasing numbers of factories and warehouses begin to use smarter robots and clever Employee Steven Ervin welds a panel for a heat wheel at AAON Inc. in west Tulsa. The company has software.” seen record-breaking growth recently. JAMES GIBBARD/Tulsa World An example, she said, is Honeywell International.

Honeywell is a Fortune 100 diversified technology and manufacturing leader for aerospace products and services; control technologies for buildings, homes, and industry; turbochargers; and performance materials.

The company is one of the top five firms in the industrial sector category for the 2016 guide. It completed 2015 with $38.6 billion in sales and $6.10 earnings per share for the year. ad 100289450-01 “Honeywell continues its strategy of growing its software-enabled businesses by acquiring Intelligrated, a leader in warehouse automation technologies,” Zhang noted, referring to the $1.5 billion purchase announced July 1 that significantly boosted Honeywell’s automation portfolio.

“As e-commerce continues to grow and the customer demands faster

Industrial sector HONEYWELL INTERNATIONAL What they do: Business/consumer services Number of employees: 129,000 Ticker symbol: HON (NYSE) Price to earning ratio: 17.66 Earnings per share in second quarter 2016: 1.66 2015 dividend: 2.15 BOEING What they do: Aerospace products and parts Number of employees: 161,400 Ticker symbol: BA (NYSE) Price to earning ratio: 23.68 Earnings per share in second quarter 2016: minus-0.37 2015 dividend: 3.64 VALMONT INDUSTRIES What they do: Building materials/products Number of employees: 10,697 Ticker symbol: VMI (NYSE) Price to earning ratio: 51.29 Earnings per share in second quarter 2016: 1.85

delivery, there is a need for warehouse to increase productivity and lower costs.”

Rounding out the top five rankings for the in-

2015 dividend: 1.50 ROCKWELL AUTOMATION What they do: Industrial machinery and software Number of employees: 22,500 Ticker symbol: ROK (NYSE) Price to earning ratio: 20.24 Earnings per share in third quarter 2016: 1.46 2015 dividend: 2.675 AAON INC. What they do: Commercial and residential heating and cooling products Number of employees: 1,676 Ticker symbol: AAON (Nasdaq) Price to earning ratio: 28.67 Earnings per share in second quarter 2016: 0.27 2015 dividend: 0.29

dustrial sector were the Boeing Co., Valmont Industries, Rockwell Automation and AAON Inc. Boeing is the world’s largest aerospace com-

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INDUSTRIAL SECTOR pany and leading manufacturer of commercial jetliners and defense, space and security systems.

According to the company’s website, it has returned $32 billion to shareholders since 2010 with $11 billion in dividends and $21 billion in share repurchases.

Valmont Industries focuses on the global infrastructure and agriculture markets with operations in a number of business segments: engineered infrastructure products, utility support structures, irrigation and coatings, and tubing, grinding media and electrolytic

manganese dioxide businesses. In 2015 the company reported $2.62 billion in net sales and $5.63 earnings per diluted share.

Valmont’s three plants in the Tulsa area are involved in the production of transmission polls.

Rockwell Automation, which provides industrial automation and information products, ended 2015 with almost a 33 percent return on invested capital, a fiscal year record. The company also increased its dividend by 12 percent and between dividends and share repurchases returned over $950

million of cash to shareowners during 2015, a 19 percent increase compared to 2014.

Tulsa’s own AAON Inc., which engineers, manufactures and sells premium air conditioning and heating equipment, announced record-level sales and earnings for 2015 of $358.6 million and $45.7 million, respectively.

Casey Smith 918-732-8106 casey.smith@tulsaworld.com Twitter: @casey_garrison

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An employee lights a burner on the test furnace at Callidus Technologies research facility near Beggs. Callidus is a division of Honeywell Combustion Technologies, which inished at the top of the industrial sector rankings. STEPHEN PINGRY/Tulsa World file

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UTILITY/TELECOM SECTOR Utilities and telecom companies provide healthy dividends for investors

AT&T

Utility/Telecom sector

Dollars per share

45 40

By Rhett Morgan Tulsa World

Investors drawn to large utility and telecommunications companies for their steady dividend yields have plenty of options, local analysts say.

Verizon tops the Investment Guide rankings in this sector, along with AT&T, IBM, Tulsa-based ONEOK and American Electric Power.

“Investors are attracted to the big telecom and utility companies for the dividend yields, irst and foremost,” said Keith Goddard, CEO of Capital Advisors Inc., a Tulsa-based management irm. “In this incredibly low inter-

est rate environment, it’s hard for investors to ind a source of dependable yield, and utilities and telecoms are a good source for that.”

The utilities sector represents industries that generate and deliver power and water. It includes nuclear facilities, electric and gas utilities, independent power producers, energy traders and generators and distributors of renewable energy.

Encompassing the telecom sector are companies that make communication possible on a global scale via either the internet or phone. The biggest irms in the sector are wireless operators, satellite compa-

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AT&T What they do: Telecommunications Number of employees: 281,000 Ticker symbol: T (NYSE) Price to earning ratio: 17.27 Earnings per share in second quarter 2016: 0.55 2015 dividend: 1.88 VERIZON What they do: Wireless telecommunications Number of employees: 177,700 Ticker symbol: VZ (NYSE) Price to earning ratio: 14.53 Earnings per share in second quarter 2016: 0.17 2015 dividend: 2.23

nies, cable companies and internet service providers.

Verizon, which boasts an attractive dividend yield of 4.2 percent, continues to see growth in

the fast-growing wireless business, said Jim Huntzinger, chief investment oicer for BOK Financial.

Verizon remains focused on growing its media technology platform through its recent purchase of Yahoo for $4.8 billion.

“Given the defensive nature of the telecom market, we think it should hold up well in uncertain markets,” Huntzinger said.

AT&T, which has a dividend yield of nearly 4.5 percent, continues to see strong cash low due to cost savings, he said. In October, it is planning to launch its Over the Top streaming TV subscrip-

ONEOK INC. What they do: Pipeline transportation Number of employees: 2,364 Ticker symbol: OKS (NYSE) Price to earning ratio: 31.24 Earnings per share in second quarter 2016: 0.40 2015 dividend: 2.43

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IBM What they do: Computer services Number of employees: 377,757 Ticker symbol: IBM (NYSE) Price to earning ratio: 12.60 Earnings per share in second quarter 2016: 2.61 2015 dividend: 5.00 AMERICAN ELECTRIC POWER What they do: Electric utilities Number of employees: 17,405 Ticker symbol: AEP (NYSE) Price to earning ratio: 18.04 Earnings per share in second quarter 2016: 1.02 2015 dividend: 2.150

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UTILITY/TELECOM SECTOR tion, which will include Direct TV Now, which should help attract the millennial demographic.

“Many investors are replacing their bonds with utility and telecom stocks,” Goddard said.

“And that will work well as long as interest rates don’t rise materially or the stock market doesn’t go into a serious decline.

“Even in that case, the dividends are safe. It’s a very sensible thing to use utility and telecom stocks as a source of income, but an investor has to recognize that there are going to be times when portfolio will move up and down a whole lot more than it would have than if they had stayed with bonds.”

IBM provides information technology as well

consecutive quarters.

“For the large and established utility companies like AT&T, like American Electric Power, the biggest driver of their stock price in the near term is likely to be interest rates,” Gooddard said. “Those stocks will move in the opposite direction of interest rates.

“There could certainly be, in the case of the telecom companies, cycles in the pricing power for wireless or a price war can break out among the wireless carriers and get investors concerned about the future. But the biggest driver is going to be the direction of interest rates.”

The Verizon campus at the Cherokee Industrial Park in north Tulsa employs about 1,200 employees. TULSA WORLD FILE

as telecommunications and cloud computing services worldwide. The irm, which has oices in Tulsa and Oklahoma City, is among the four companies that dominate the marketshare in cloudbased services.

OKE is the general part-

ner of ONEOK Partners LP, which owns and operates one of the nation’s largest natural gas liquids systems. Since becoming a pure-play general partner in 2014, OKE has seen a 54 percent dividend increase and now has a dividend yield of 5.25 percent.

American Electric Power is the parent company of Public Service Company of Oklahoma, which is headquartered in Tulsa

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and provides electricity for more than 540,000 people across the state.

AEP has paid out dividends for more than 400

Rhett Morgan 918-581-8395 rhett.morgan @tulsaworld.com

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CONSUMER SECTOR Consumer sector WHIRLPOOL CORP. What they do: Home appliance manufacturer Number of employees: 1,000 in Tulsa, 100,000 worldwide Ticker symbol: WHR (NYSE) Price to earning ratio 2015: 14.75 Earnings per share in second quarter 2016: 4.15 2015 dividend: 3.45 WAL-MART STORES What they do: Retail/wholesale stores Number of employees: 2.3 million Ticker symbol: WMT (NYSE) Price to earning ratio: 15.74 Earnings per share in second quarter 2016: 1.21 2015 dividend: 0.50

KIMBERLY-CLARK What they do: Paper product manufacturer Number of employees: 43,000 Ticker symbol: KMB (NYSE) Price to earning ratio: 22.75 Earnings per share in second quarter 2016: 2.78 2015 dividend: 0.92 MACY’S What they do: Retailer Number of employees: 157,900 Ticker symbol: M (NYSE) Price to earning ratio: 13.90 Earnings per share in second quarter 2016: 0.54 2015 dividend: 0.38 TYSON FOODS What they do: Food processor Number of employees: 113,000 Ticker symbol: TSN (NYSE) Price to earning ratio: 17.77 Earnings per share in second quarter 2016: 1.21 2015 dividend: 0.15

A crew celebrates the 20 millionth range produced at Whirlpool Corp.’s Tulsa plant in 2014. Courtesy

Some companies are well positioned because they provide essential goods to consumers

By Samuel Hardiman Tulsa World

The consumer sector features ive companies that have a signiicant footprint in Tulsa, but

none of them are headquartered here.

Two of the companies — Whirlpool and Kimberly Clark Corp. — use Tulsa for part their manufacturing base. Another, Tyson

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Foods, has several Oklahoma facilities. Macy’s and Wal-Mart are national brands with a local retail presence and a large area workforce.

The consumer sector features retailers and companies that make consumer goods. When the economy is going well

and wages are up, people are more likely to spend and these stocks should beneit. But some of them, Kimberly Clark and Tyson Foods in particular, make things that are tough for consumers to live without no matter the economic climate — toilet paper and chicken products.

Whirlpool, which has a manufacturing facility on 56th Street North, makes household appliances. Local wealth managers liked Whirlpool because of its market share and its ability to capitalize on continued economic growth.

BOK Financial Chief Investment Oicer Jim Huntzinger said, “WHR has a very strong brand portfolio with seven plus$1 billion brands. WHR is well positioned to beneit from continued strong

housing starts and a robust home improvement market.”

Wal-Mart employs more than 30,000 people state-

wide, making it one of the state’s largest employers. It has more than 100 stores and a distribution center in Oklahoma.

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CONSUMER SECTOR Sid Shupack of First State Investments said he liked Wal-Mart as a longterm stock because of its massive market share in the United States. He said, despite recent dips in its stock price, it retains the ability to squeeze margins out of its suppliers. He acknowledged that Amazon, the e-commerce giant, has hurt Wal-Mart as it has other retailers. However, he said the Bentonville, Arkansas-based company’s

decision to buy Jet.com will pay dividends.

Kimberly Clark has a plant in Jenks that employs about 400. It makes bath tissue and other household goods. It has dominant market share in the goods it makes.

Macy’s is a legacy brick and mortar retailer that has two stores in Tulsa. But that’s not what makes it a local company. It has a new massive fulfillment center near Owasso that employs

more than 1,000 yearround and thousands more during the holiday season.

BOK Chief Investment Officer Jim Huntzinger: “Macy’s just announced plans to close 100 under-performing stores out of a total store base of 728 stores. The reaction to this announcement was viewed extremely positively … and should be set up very well for easier samestore sales comparisons in the coming quarters.”

Tyson Food operates sev-

eral plants in eastern Oklahoma along the Arkansas border, including ones in Westville and Colcord, as well as a plant in southern Oklahoma. Since acquiring Hillshire Farms, Tyson has expanded its hold on the grocery store aisle.

Samuel Hardiman 918-581-8466 sam.hardiman @tulsaworld.com Twitter: @samhardiman

Wal-Mart Academy graduates walk across the stage at a Wal-Mart Supercenter in Broken Arrow. Wal-Mart has recently begun investing more in its employees, attempting to improve its image in the process. CORY YOUNG/Tulsa World file

Tyson Foods

Dollars per share

80 60 40 20 0

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FINANCE SECTOR Mortgage business and the consumer sector help ofset the low-interest rate environment

By Rhett Morgan Tulsa World

A low interest-rate milieu has pocked the landscape for the inance sector.

But factors such as a strong housing market, which propels the mortgage business, and bolstered consumer conidence have allowed the group to hold its own, one analyst says.

“For the inancials, so far this year, they’ve been the laggard as far as all the diferent sectors,” says local investment adviser Dan Safranek, president of Safranek & Associates.

“They make money of the interest-rate spreads.

They’ve been pressured in this low-interest rate environment for many years now.”

Besides the mortgages that grow out of the housing market, the inance sector has been boosted by the consumer sector, he says.

“The consumers have really healed themselves after the Great Recession,” Safranek says. “The consumers’ balance sheet has really kind of gotten into shape and that has allowed households to take on more loans or increase their debt capacity.”

“Also, from the banks’ side, default rates have decreased. And lending to the corporate sector has

Finance sector JP MORGAN CHASE What they do: Major international bank Number of employees: 234,598 Ticker symbol: JPM (NYSE) Price to earning ratio: 11.28 Earnings per share in second quarter 2016: 1.55 2015 dividend: 1.68

been very good in terms of sidestepping some of the issues in the oil and gas industry. They didn’t get stuck into the vortex of

the oil and gas downturn, which was a major fear.”

JP Morgan Chase was rated a top inancial company in the Investment Guide, as well as Bank of America, Berkshire Hathaway A, Berkshire Hathaway B and BOK Financial.

JP Morgan Chase is global leader in inancial services with assets of nearly $2.5 trillion with more than 5,400 branches in the United States and operation in more than 60 countries, says Jim Huntzinger, chief investment oicer at BOK Financial.

He added that with a dividend yield of nearly 3

BANK OF AMERICA What they do: Major international bank Number of employees: 213,000 Ticker symbol: BAC (NYSE) Price to earning ratio: 13.56 Earnings per share in second quarter 2016: 0.36 2015 dividend: 0.20 BERKSHIRE HATHAWAY A What they do: Multinational conglomerate Number of employees: 331,000 Ticker symbol: BRK.A (NYSE) Price to earning ratio: 14.18

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Earnings per share in second quarter 2016: 15,513.00 2015 dividend: None BERKSHIRE HATHAWAY B What they do: Multinational conglomerate Number of employees: 331,000 Ticker symbol: BKR.B (NYSE) Price to earning ratio: 14.14 Earnings per share in second quarter 2016: 10.34 2015 dividend: None BOK FINANCIAL What they do: Financial services, bank holding company Number of employees: 4,789 Ticker symbol: BOKF (Nasdaq) Price to earning ratio: 18.71 Earnings per share in second quarter 2016: 1.00 2015 dividend: 1.69

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FINANCE SECTOR Bank of Oklahoma, Bank of Texas and Bank of Albuquerque. Bank of Oklahoma is the largest bank in the state, with 15 percent of deposits.

“When rates rise, there’s going to be a lot of money sloshing around trying to ind a home,” Safranek says. “Another risk is if interest rates rise too fast or too high.

“It’s a really ine line.

It’s like the bears and the porridge. It can’t be a little too hot or a little too cold.

It has to be just right.”

The Bank of Oklahoma near Hillside Drive in Broken Arrow, which opened in May, is the irst new branch built since 2008. JAMES GIBBARD/Tulsa World file

percent, JPM is “attractive in this low-rate environment.”

Bank of America is among the largest banks in the county with at least $2.1 trillion in assets and 4,700 retail banking oices. It also has large wealth management presence through its ownership in Merrill Lynch and U.S. Trust, maintaining the top deposit market overall and the No. 1 deposit position in 11 of the top 30 MSAs. The biggest dissimilarity between Berkshire Hathaway A and B is share price. The former trades at about $220,000 per share, the latter about $150.

Berkshire Hathaway CEO Warren Bufet has said he created Class B shares to give smaller investors the opportunity to invest directly in the company.

The Tulsa World is owned by Berkshire Hathaway’s BH Media Group.

“In recent years, BRK has become far less reliant on its insurance business

tended or elongated the whole recovery process.”

Tulsa-based BOK Fi-

nancial is the holding company for several banks, including the

JP Morgan Chase & Co. has several local branches and is the eighth-largest bank by market share in Tulsa. TULSA WORLD FILE

ad 100287013-01 through the purchase of Precision Castparts, Heinz and BNSF,” Huntzinger said. “Berkshire generates substantial free cash low that has placed the company in a position to continue to make acquisitions when the opportunity presents itself.”

The government has played a role in shaping the inance sector, Safranek says.

“The normal forces that would be exerting their inluence have been

skewed by fed policy, by short-term interest rates,” he says. “Nothing is going by traditional playbook necessarily. Things have been skewed to a certain degree. It’s really been dificult to use history to peg down and see what’s the next step for the sector.

“Historically, by this time in a recovery after the Great Recession, we’d be seeing things a lot different than they are now.

The policies that have been put in place have ex-

Rhett Morgan 918-581-8395 rhett.morgan @tulsaworld.com Twitter: @RhettMorganTW

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