It was a turbulent year for local stocks

Jan. 13--One truly is the loneliest number.

Just ask Welltower Inc.

In a year in which the Dow Jones Industrial Average began on a note so high a soprano would be jealous -- a record 26,149 points -- the stock markets later were disrupted by detrimental trade issues and volatile political winds.

By Dec. 31, every publicly traded company in northwest Ohio and southeast Michigan, save Welltower, saw its share price finish below its starting point.

By default, Toledo-based Welltower, which joined with Toledo health-system provider ProMedica last May to pull off one of the biggest deals seen in metro Toledo in decades -- the $3.3 billion purchase of Toledo's HCR ManorCare -- was 2018's top local company in terms of total return on investment.

Out of 17 publicly traded companies in the Toledo area, it was the only one whose share price increased over the year, and it also was one of just two companies that provided its shareholders with a positive investment return last year. The other 15 companies saw stock declines and their investors lost money.

Welltower, a real estate investment trust (REIT) that specializes in senior-living communities and medical properties, delivered a stock-and-dividend total return of 14.3 percent.

Its stock began the year at $63.77 a share and finished at $69.41, up nearly 9 percent. Welltower shareholders also enjoyed a hefty total dividend of $3.48 a share in 2018.

The only other company with a positive return on investment was Fremont-based Croghan Bancshares, Inc., the parent firm of Croghan Colonial Bank, with a total return on investment of 1.9 percent.

But Croghan's positive return was due to its $1.50 dividend. Its share price finished down 1 percent at $49.75 after starting 2018 at $50.30 a share.

Excluding Welltower and Croghan Bancshares, the rest of the 15 public companies in the region had a negative return on investment ranging from 1.9 percent to 56.2 percent.

Made with Flourish

"It was a good year to be a REIT," said Tim McHugh, Welltower's senior vice president of corporate finance, who stressed that one cannot understate the impact of the HCR ManorCare deal.

"If you think about the performance of our stock, some if it is just primarily market driven. But our stock bottomed out the day before the announced acquisition," Mr. McHugh added.

"From there we outperformed our peers and had a fantastic last six to seven months of the year," he added.

Mr. McHugh said the $3.3 billion deal opened the eyes of many in the health-care industry "and is still being talked about globally."

Essentially, three distinct companies each with something vital to offer came together to create a health-care model that as a whole was greater than the sum of the individual parts, the executive said.

"One of the things that ... our CEO has said since he stepped in is we're going to be a prominent force in helping health-care systems as they continue to evolve their delivery mechanism," Mr. McHugh said

In the ManorCare deal, Welltower purchased the buildings and real estate of ManorCare, freeing ProMedica of that cost and enabling it to use its capital in other ways to integrate and upgrade ManorCare's 168 skilled nursing homes, 54 assisted-living centers, and 100 home-health and hospice locations.

"What we've been saying for a while is it makes sense for the health systems in the country to use their capital more to invest in their system. And have companies like Welltower invest in real estate," Mr. McHugh said.

Welltower "gave the market an extremely creative way to do that," he added.

Investors responded favorably to the move with Welltower's stock increasing 33 percent between the date of the announcement and the end of the year.

Three metro Toledo-based companies had the biggest stock declines. Libbey Inc.'s total return fell 46.8 percent, Owens Corning was down 51.2 percent, and Dana Inc. fell 56.2 percent.

Banking stocks other than Croghan also were in negative territory.

Despite a two-for-one stock split in July, First Defiance Financial Group of Defiance, finished down 2.2 percent; Farmers & Merchants Bancorp, of Archbold, Ohio, dropped 4.3 percent; United Bancshares of Columbus Grove, Ohio, fell 7.7 percent; MBT Financial of Monroe was down 9.2 percent, and SB Financial Group of Defiance dropped 9.3 percent.

Overall, an individual who purchased one share of each of the 17 firms at the start of the year would have paid $675.91 and by the end of 2018 those shares would have been worth a combined $557.69 -- for a loss of $118.22.

On a positive note, that investor would have received $18.82 in dividends, but their total return on investment would have been -14.7 percent.

While 2018 ranks as one of the poorest showings by the region's publicly traded companies in many years, it wasn't totally unexpected or isolated.

The Dow Jones Industrial average finished 2018 down 5.6 percent, the S&P 500 Price Index ended the year down 6.2 percent, and the Nasdaq market ended down 3.9 percent.

The Dow experienced significant gyrations during the year, losing 2,000 points between Jan. 1 and March 1, gaining 2,200 points between June 1 and Sept. 1, and then losing 1,300 points in September, 2,200 points in November, and finally 2,500 points in December.

During the year the Fed raised interest rates four times, President Trump launched a trade war with China by placing tariffs on hundreds of items, the effects of tax cuts in 2017 helped some companies and hurt others in 2018.

Many of the companies in the area finished 2017 at high prices and while they experienced a sharp drop in share prices, they ended 2018 close to where they began 2017.

"You look at interest rates, slow loan growth, and that kind of explains the banks," said Matt Faltys, senior vice president and director of regional portfolio management for Fifth Third Private Bank in Toledo.

"With [Findlay-based Marathon Petroleum Corp.] and [Findlay's] MPLX (LP), it's a fall off in energy rates," he added.

Owens Corning faced an extreme decline. At the start of the year its share price was at $91.94, but it finished the year at $43.98 a share.

"Owens Corning faced a little housing slowdown," Mr. Faltys said. Owens Corning makes insulation, roofing shingles, and other building products.

The housing sector started the year strong, but in the second quarter some analysts began issuing warnings that OC could be facing a slowdown in the roofing segment. From March on the company's share price began to drop steadily.

Recently it became clear that OC was hit by higher material and transportation costs, and its roofing sales over the final three quarters of 2018 declined 2 percent over that time. The drop was mainly lower sales of shingles particularly in certain geographical areas.

Mr. Faltys noted that many of the companies in northwest Ohio and southeast Michigan are in industries that are cyclical; that is, they do well when the economy is booming and less well when it is not.

"When money comes out of the market, it will usually come out of stocks that are most cyclical. Unfortunately, northwest Ohio ohio has a lot of cyclical stocks," Mr. Faltys said. "Institutional investors at the end of the year we're trying to clean up their statements and they took a lot out of the market.

"These highly cyclical companies, if there was any doubt about their earnings, that just crushed their stocks."

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