New Rural Stock Index: The Yonder 40

The editor of an Austin, Texas-based online rural issues Web site has enlisted the support of savvy Wall Streeters to develop a rural stock index to measure its performance against other investment indices and economic data.

What Bill Bishop, editor of the Center For Rural Strategies’ Daily Yonder, hopes to learn from the intriguing experiment is what the index can explain or predict about economic life in rural parts of the nation. When do rural areas do better than urban ones? How connected is the performance of the index to wages and on-the-ground economic data in small towns?

“It’s also a way of allowing people in rural areas to see they have an economy outside of cities,” Bishop told Iowa Independent.

The Daily Yonder runs frequent update stories with a lively commentary section on the stocks. Some of the stocks on The Yonder 40 include:  Smithfield Foods, Wal-Mart, Tractor Supply Co., Tyson Foods Inc., Lee Enterprises and Peabody Coal.

The following is a post from July 20, analyzing the Yonder 40 for the last week:

Several Yonder stocks had bad weeks. Lee Enterprises, which operates newspapers in smaller towns, was down by more than 11 percent in the week. Lee reported that advertising revenues in May were down 1.7 percent from 2006, reflecting the general poor business environment for newspapers. Peabody Coal was off by nearly 7 percent, after a downgrade of coal stocks. Southwest Bancorp was down by nearly 8 percent after several neutral ratings from analysts.

Jim Branscome, a former managing director at Standard & Poor’s, helped craft the index. This is what he had to say about it on a post Monday afternoon on the Daily Yonder.

None of us may like it and would love a stock index that reflects the hard work of the small farmer and throws in the sweet smell of alfalfa drying in the windrow, but the reality of what really drives the rural American economy is Wal-Mart and the 39 other companies in the Yonder 40.

We did take the Waltons down a few notches when we equal-weighted their $115 billion colossus in the Yonder 40 with the $4 billion Dean Foods that peddles butter and half and half, all made from real American milk. Or, at least, none of it from cows in China.

We sorted through about 3000 stocks before we selected the sainted 40. It would have been nice had we come across investable public companies that represent farmer cooperatives, rural electric co-ops, or worker-owned coal mines and sawmills. There ain’t none. No fan of the Daily Yonder may be comfortable with it, but the reality is that Thomas Jefferson’s vision of America as a nation of farmers and toilers in the soil is as dead as our third president. Or at least that’s what you find when you try to construct an index using SEC registered and stock exchange listed companies for rural America.

Had we tried somehow to value the private companies that deal with rural America, impossible as that probably is, we would also have had to list Cargill and Koch Industries and the Chicago Board of Trade as well as the little bitty businesses that dot our small towns.

Those of us who think about indices and derivatives and also love rural America would love to find some way so we could all go short the Farm Bill and all the presidential candidates who haven’t even bothered for more than a few minutes to construct a rural policy platform. More work to be done!

We’re always open to suggestions of public companies that we may have overlooked. Given how fast mergers and acquisitions are taking place these days, we are going to need some good replacement candidates!