by Jordan, Knauff & Company
10/22/2013

The Jordan, Knauff & Company (JKC) Valve Stock Index was up 27.8 percent during the last 12 months, above the broader S&P 500 Index which was up 16.4 percent. The JKC Pump Stock Index was up 28.7 percent for the same time period.1 The Institute for Supply Management’s Purchasing Managers’ Index (PMI) registered 56.2 percent in September, its highest reading since April 2011. For the month, the New Orders Index decreased by 2.7 percentage points to 60.5 and the Production Index rose slightly to 62.6 percent. The Employment Index registered its highest reading of the year at 55.4 percent. Because of relatively strong growth in production and new orders, manufacturing activity accelerated during the last four months. The New Orders Index increased to 60.5 percent in September, while the Production Index increased from 53.4 percent to 62.6 percent. During the last four months, the PMI averaged 54.5 percent, and new orders reached an average of 58.5 percent. The Exports Index fell from 55.5 percent in August to 52.0 percent in September.

Figure 1. Stock indices from Oct. 1, 2012, to Sept. 30, 2013
U.S. refiners exported a record 3.8 million barrels of petroleum products per day in July, almost 65 percent above export levels in 2010, according to the U.S. Energy Information Administration (EIA). Exports to Asia have grown by 31 percent over the first seven months of 2013 with greater demand from China and India. North African countries have increased their imports from the U.S. by more than 52 percent. New markets have also opened in West Africa, where U.S. imports rose 60 percent during the same time period.
Figure 2. U.S. energy consumption and rig counts
U.S. diesel exports have doubled since the beginning of the year surpassing one million barrels per day (bpd) for the first time this summer. In 2010, diesel exports averaged 300,000 bpd. Low-sulfur diesel that meets the stringent air quality standards being put into place in South and Central America is in high demand.
Figure 3. U.S. PMI index and manufacturing shipments
The EIA estimates that the U.S. will overtake Russia and Saudi Arabia to become the world’s top producer of petroleum and natural gas hydrocarbons in 2013. For the past five years, U.S. petroleum production has increased by 7 quadrillion Btu, while natural gas production has increased by 3 quadrillion Btu. Russia and Saudi Arabia each increased their combined petroleum and natural gas output by only one quadrillion Btu. On Wall Street stocks performed strongly in the third quarter led by the NASDAQ Composite Index which was up 11 percent, while the S&P 500 Index rose 4.7 percent and the Dow Jones Industrial Average was up 1.5 percent for the quarter.

Reference

1. The S&P Return figures are provided by Capital IQ.



Jordan, Knauff & Co. is an investment bank based in Chicago, Ill., that provides merger and acquisition advisory services to the pump, valve and filtration industries. Please visit www.jordanknauff.com for further information on the firm. Jordan Knauff & Co. is a member of FINRA.