Isle-based firms see stock success

Hawaii is about as far away from Wall Street as one can get when it comes to publicly traded companies.

The state is 5,000 miles from the nation’s leading economic and financial center, and the islands have only nine companies with market capitalizations of $150 million or greater.

But being small and geographically isolated can have its advantages. In Hawaii, where everybody seems to know one another, most people have a pretty good idea of what is going on with local companies. And as former Fidelity Magellan stock guru Peter Lynch used to say, buy what you know.

Three Hawaii companies with a market value of at least $150 million have doubled in stock price since the 18-month Great Recession ended in June 2009.

The best performer has been Hawaiian Holdings Inc., the parent company of Hawaiian Airlines. Its shares, which traded as low as 30 cents in June 2003 during its bankruptcy, have jumped 156.5 percent from July 1, 2009, through Friday and now are priced at $15.44. All of that gain has occurred in the past 12 months with the stock jumping 160.8 percent after the stock lost 3.7 percent from July 1, 2009, to May 29, 2013.

Alexander & Baldwin Inc., which split its real estate operations into a separate company from ocean shipper Matson Inc. at the end of June 2012, was up 151.1 percent from the end of the recession until the split.

The other double-your-money stock in this post-recession period is Territorial Bancorp Inc., the holding company for Territorial Savings Bank. Its shares have risen 126.8 percent since July 13, 2009, when it converted from a mutual holding company to a publicly traded corporation. Nearly half of that rise, though, came on its first day of trading when it jumped 49.9 percent.

Living in Hawaii sometimes can be an advantage when investing in local stocks, according to Richard Dole, chief executive officer of Hono lulu speciality investment bank Dole Capital LLC.

"Local investors are probably better able to assess risk than if they weren’t in Hawaii, such as the dynamics of the economy, which is boom and bust mostly because of tourism," he said.

But profiting from Hawaii-based stocks isn’t exclusive to local investors.

Zac Hirzel, the 37-year-old founder and president of Dallas-based Hirzel Capital Management LLC, began accumulating shares of Hawaiian last year and now is the company’s largest shareholder with a 10.6 percent stake. Hirzel, who owns 5,665,563 shares worth $86.7 million, was added by Hawaiian to its board of directors in December.

Hirzel would not comment about his investment Thursday due to "agreements and compliance," but said in a letter to the company in May 2013 before becoming a director that Hawaiian represented "an intriguing opportunity" as an investment and that Hawaiian’s shares were undervalued. Hirzel accumulated most of his shares for between $5.50 and $6 last spring and has seen the stock price more than double.

Norm Caris, a Kauai resident and managing director for Los Angeles-based investment bank B. Riley & Co., said Hawaiian’s stock has taken off for several reasons.

"The airline group has been strong; people finally figured out that there’s a well-run airline in Hawaii; and the airline was fortunate enough to add a very smart hedge fund manager (Hirzel) to its board," Caris said.

Caris said consolidation among the big airlines has helped the industry.

"They’re closing down unprofitable routes, and there are some investors who believe that the price of oil is going to go down for the next two years," he said.

Since the end of the recession, the Dow Jones industrial average has posted a total return of 124.1 percent with the Standard & Poor’s 500 index up 126.7 percent and the Nasdaq composite index up 137.5 percent.

While Hawaii-based stocks with market caps of at least $150 million have posted solid results during that time, most have underperformed those indexes.

That’s why investors should take into account all factors, including location, and invest in a portfolio of businesses that pre sent the best risk-adjusted opportunities, according to Barry Hyman, vice president, private client group, for the Maui branch of FIM Group Ltd..

"If the outlook for a Hawaii-based company is positive and it is one of the best-positioned well-managed and reasonably priced companies in its space, it should be considered," he said. "If a similar investment in Timbuktu has better qualities, fewer head winds and is priced at a better price considering all risks associated with the investment, then it should be favored."

Bank of Hawaii Corp., the state’s second-largest bank with $14.3 billion in assets, is up 88.4 percent since the end of the recession to rank fourth among total returns by local stocks. Bankoh was named the top performing large bank in 2013 by the national trade publication ABA Banking Journal.

The state’s largest bank, First Hawaiian Bank ($17.3 billion in assets), isn’t publicly traded as a stand-alone company because it is owned by French banking giant BNP Pari bas.

Hawaiian Electric Industries Inc., which owns the state’s dominant utility (Hawaiian Electric Co.) and the state’s third-largest bank (American Savings Bank), has the fifth-best return at 63.5 percent, but that is largely fueled by its dividend’s attractive 5.2 percent yield. Without the dividend, HEI’s stock is up just 26.2 percent since the end of the recession.

"Utilities generally have higher dividends than other companies," Dole said. "Hawaiian Electric has a very high dividend. It’s hard to find utilities that pay that much. The dividend is attractive compared to the 10-year U.S. Treasury bond, which is now at 2.48 percent."

Bank of Hawaii, with a 3.2 percent yield, and Territorial, at 2.9 percent, offer the next-best dividends of any Hawaii-based company.

Alexander & Baldwin has posted a total return of 51.1 percent since its split at the end of June 2012, while Matson, which has been plagued by several million dollars in legal expenses tied to the September molasses spill in Hono lulu Harbor and a federal lawsuit over fuel surcharges, has seen its stock lose 8.1 percent since the split.

Central Pacific Financial Corp., the parent company of Central Pacific Bank, has lost 56.6 percent since the end of the recession. That was largely due to overexposure to the Cali for nia real estate meltdown that contributed to the state’s fourth-largest bank losing $703.1 million from 2008 to 2010. Since then the bank has recapitalized its balance sheet with $345 million from private-equity investors and existing shareholders, posted 13 consecutive profitable quarters and conducted a 1-for-20 reverse stock split in February 2011 to avoid being delisted by the New York Stock Exchange.

Hawaiian Telcom Holdco Inc., which emerged from bankruptcy in October 2010 and went public two months later, has risen 55.2 percent since that time. It broadened its services by introducing a new television service July 1, 2011, and increased its exposure by switching its stock listing from over the counter to the Nasdaq a few days later.

Maui Land & Pineapple Co., which has continued to struggle even after exiting pineapple farming in 2009, is up only 4.5 percent since the recession. The company now focuses on real estate development, leasing, water and sewer services, and operating a membership club within Kapa lua Resort. Former AOL co-founder and Hawaii native Steve Case is the majority shareholder with a 63.6 percent stake.