Throughout the month of December, the US market went from volatile to tense. The events of the month were one of reaction to the economic indicators and forecasts with investors bracing for what lies ahead for the upcoming year.

The tariffs situation continued to affect investors’ sentiments. On December 1, the US and China began trade discussion that would continue through 2019 with both parties hoping to reach a deal by March 1. In addition to the talks, the US canceled the tariffs that would have been imposed on $200 billion of Chinese goods on January 1.

Despite this positive news, on December 7, major US stock indexes declined more than 4%, ending the first week with the worst start to a December since 2008. On the same date, the Bureau of Labor Statistics reported a steady unemployment rate at 3.7%, but this did little to curb investors’ worries about the economy. Stock sell-offs continued throughout the month as the US stock market concluded the year with its steepest one year decline since 2008. As skepticism in stocks grew, investors began to invest in safer alternatives, such as gold and Treasury Bonds.

Additional negative economic news came on December 21 as the Commerce Department revised the third quarter GDP estimate to 3.4%. Advisors project the fourth quarter GDP will grow to 2.6%, due to the US-China trade discussions and headwinds for the manufacturing and housing sectors.

Oil prices were also a source of concern. After the OPEC announcement that it will cut production beginning in 2019, oil prices gained some traction, rising to $51.76 on December 10. But on December 17, oil finally sank below the $50 level. On December 31, the price of oil ended the month down 14% and down 19% for the year to $45.81. Reasons for the consistent downturn was low demand, oversupply due to US shale production, and sanction waivers by the US for Iranian oil.

Another blow to stocks was interest rate increases. As predicted, the Federal Reserve raised interest rates on December 19 by a quarter of a percentage point to 2.5%. The Fed is scheduled to implement two more rate hikes in 2019 and another in 2020. The Fed’s reasoning for the hike is that despite the volatility of the US stock market, strong US economic data such as consumer spending and the low unemployment rate created a good foundation for a strong economy. In addition, the Fed believes the economy will continue to grow albeit at a slower rate.

In December, US equity markets finished the year in negative territory, as the S&P 500 fell 6.2% to 2,506.85. Similarly, the Dow Jones Industrial Average declined 5.6% to 23,327.46, while the NASDAQ Composite dropped 3.9% to 6,635.28. For December, the three markets’ performance was lackluster as well, decreasing 9.2%, 8.7% and 9.5%, respectively.

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Laboratory Instruments and Product Socks 2018

In spite of a rough 2018 for the major US indexes, the IBO Laboratory Instrument and Product Index delivered a strong performance in 2018, up 10.5%, as shares of most of the companies in the IBO Laboratory Instruments and Products Index delivered positive results. On average, the Index has grown 15.0% since 2015. Overall, the Index outperformed the three major US stock indexes in 2018.

In fact, only 8 of the 20 stocks in the Index decreased in price.  Enzo Biochem posted the most rapid decline, dropping 65.9% as the company reported falling revenues and a notable rise in operating loss for its fiscal year. MTS Systems’ revenues also declined for its fiscal year with its stock down significantly as well, falling 25.3%. The only other Index company to experience a double-digit decline for the year was Bruker. Mettler-Toledo and Quanterix decreased 8.7% and 6.3%, respectively.

The Index’s fastest grower for the year was Pacific Biosciences, increasing 180.3% to close at $7.40 largely due to Illumina’s acquisition announcement (see IBO 11/15/18). NanoString Technologies’ share price also delivered strong growth, increasing 98.5% to finish at $14.83 as the company showed continued strong demand for both its current systems and assays and forthcoming technologies, as well as growing acceptance of its diagnostics offerings.

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Diversified Instrument Stock Index 2018

On the other hand, the IBO Diversified Instrument Index declined 8.4% over the same time frame, following the stock market’s overall trend. This is not surprising due to these companies’ exposure to industrial growth patterns and wide range of markets served. For the year, Danaher, Roper Technologies and Teledyne Technologies ended in positive territory, while the remaining five companies were down. Teledyne Technologies’ share price rose the most, up 14.3% to close at $207.07. Danaher’s share price grew at a similar pace, increasing 11.1% to end the year at $103.12. Overall, all stocks in the Diversified Instrument Index performed in tandem with the three major US stock indexes, especially the NASDAQ Composite.

Despite the strong performances of Pacific Biosciences and NanoString Technologies in 2018, on average, during the last three years, it has been Kewaunee Scientific that has delivered the fastest growth, increasing 23.2% since 2015 to finish this year at $33.24. This was helped in part by the company’s rapid rise in share price this year and perhaps a perception of undervaluation. For the year, Kewaunee Scientific‘s share price rose 31.1%, spurred by double-digit fiscal year sales growth.

Despite Pacific Biosciences’ robust growth in share price for the year, the stock has fallen the fastest on average over three years, dropping 17.4%, as it continued to experience losses in operating income. Enzo Biochem, MTS Systems, Fluidigm and Harvard Biosciences also experienced losses on a three-year average, dropping 14.8%, 14.1%, 7.3% and 2.9%, respectively. During the period, each company has been hit by uneven revenue growth and a shift in product focus.

International Stocks 2018

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For the year, most Asia Pacific indexes finished with negative growth. Shanghai’s Shanghai Composite declined the fastest, decreasing 24.6% to 2493.90. Hong Kong’s Hang Seng also experienced a significant decline, decreasing 13.61%. Conversely, India’s Sensex was the only index to have positive gains for its share price, increasing 6.67% to 36068.33.

For the year, most Asia Pacific shares in the IBO Stock Table finished in negative territory as Japan’s stock markets tumbled. Precision System Science finished the year with unimpressive returns, as shares fell 59.5% to close at ¥268.0 ($2.38 at ¥112 = $1). Likewise, GL Sciences, HORIBA, Hitachi High-Technologies and Shimadzu all experienced double-digit decreases, dropping 40.0%, 33.9%, 27.3%, and 15.1% respectively.

Conversely, JEOL’s share price experienced the fastest growth, climbing 159.3% to ¥1,657 ($14.69), as the company reversed sales declines and operating losses in the first six months of its fiscal year to post gains in each. This performance helped the company place among the top 3 international performers on average in the IBO Stock Table over a 3-year period. Yunnan Energy (formerly Techcomp) also experienced positive gains for share price, delivering an 89.9% growth, finishing the year at HKD 3 ($0.38 at HKD 7.82 = $1).

As for European indexes in 2018, Germany’s XETRA DAX delivered the fastest decline, decreasing 18.26% for the year. In addition, Italy’s FTSE MIB, Spain’s IBEX 35, STOXX Europe 600 and France’s CAC 40 all fell double digit, decreasing 16.2%, 15.0%, 13.2% and 11.0% respectively.

European shares in the IBO Stock Table experienced positive share price gains for the year, with just four companies down. Horizon Discovery had the worst performance, finishing at £1.75 ($2.24), a 27.1% decrease. Conversely, Scientific Digital Imaging experienced the fastest growth, advancing 42.1% to close at £0.35 ($0.45).

Among other European shares, Biotage and Sartorius share prices both delivered double-digit growth, advancing 29.8% and 27.3% with each company reporting consistently strong sales growth. In fact, Biotage was also the best performing international share in the IBO Stock Table over a three-year average.

In turn, the three international shares that delivered the greatest negative results on average over three years were Sartorius and Precision System Science. Compared to last year’s three-year average growth figures, Precision System Science remained at the bottom again, while Sartorius dropped drastically from being one of the top 3 three-year gainers in 2017 to being one of the top 3 three-year losers in 2018.

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Laboratory Instrument and Product Stocks

For the month, the IBO Laboratory Instruments and Products Index stocks fell 9.9% to $372.85, snapping a one month increase. The Index’s largest gainer was Kewaunee Scientific, up 31.1% to $33.24, driven by an increase in its domestic sales as reported on December 4. However, international sales turned negative due to the decline in the exchange rate of the Indian rupee and the continuing effects of an unusually large order in the Middle East which impacted the company’s operating performance. The company reported an EPS of $0.52, a $0.12 or 18.8% decrease.

Apart from Fluidigm, the rest of the stocks in the Index finished the month in negative territory with MTS Systems falling the most, down 22.0% to close at $40.13. Luminex’s share price also decreased double digits, down 21.3% to finish the month at $23.11.

In other news, on December 9, Enzo Biochem reported fiscal 2019 first quarter financials. For the quarter, adjusted EPS increased from a $600,000 loss to a loss of $6.0 million. The company did not provide an adjusted EPS forecast for fiscal second quarter 2019.

As aforementioned, Fluidigm was only 1 of 2 Index companies to show a positive gain for its share price, which increased 5.1% to $8.62, driven by strong mass cytometry sales. Fluidigm announced on December 11 the pricing of an underwritten public offering of 8.15 million shares of its common stock at a price of $6.75 per share. On December 14, the public offering concluded with 9.4 million shares of common stock sold that yielded gross proceeds of $63.3 million, a 15.5% increase of from its initial forecast of $55 million. The net proceeds amounted to $59.1 million. The purpose of the public offering was to use the proceeds for general corporate purposes, such as working capital, capital expenditures and R&D.

On December 13, Waters was downgraded by JP Morgan Chase from a “neutral” rating to an “underweight” rating and a $180.00 price target, a 6.1% downside from the then-current price of $191.72.

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Diversified Instrumentation

In December, all the companies in the IBO Diversified Laboratory Index ended in the negative. Danaher shares fell the least, declining 5.9% at $103.12. Conversely, Roper Technologies’ share price fell the most, ending the month at $266., a 10.4% drop. The overall Diversified Laboratory Index decreased 8.3% to $249.13.

In other news, on December 7, Illinois Tool Works announced its preliminary full-year 2019 guidance. The company forecast a GAAP EPS of $7.90–$8.20, a 2.6% difference from the consensus estimate of $8.11. In addition, the company projected full-year 2019 organic sales to increase 2%–4%. The company did not change its full-year 2018 GAAP EPS guidance (see IBO 11/1/2018). In rating news, on December 18, Morgan Stanley downgraded Illinois Tool Works from an “equal weight” rating to an “underweight” rating, with a $115.00 analyst price target, a 9.8% decrease from the then-current price of $127.56.

On December 17, Barclays gave Honeywell an “overweight” rating and a $170.00 price target, a 24.9% upside from the then-current price of $136.06. On the same date, Barclays gave Roper Technologies an “equal weight” rating and a $287.00 analyst price target, a 5.7% increase from the then current price of $271.45.

Xylem was given an upgraded rating from “hold” to “buy” by Stifel Nicolaus on December 19, along with a $75.00 price target, a 13.7% upside from the December 19 price of $65.94.

Danaher announced its full-year 2019 adjusted EPS guidance on December 13. The company forecast adjusted EPS of $4.75–$4.85, with an expectation of core revenue growth increasing 4%.

AMETEK announced on December 17 that it would sell $660 million in senior notes in a private placement with institutional investors at a weighted interest rate of 3.93% and an average maturity of 8.2 years. Proceeds from the offering will be used to provide capital to support corporate initiatives and to repay debt.  In rating news, on December 18, Morgan Stanley upgraded AMETEK from an “equal weight” rating to an “overweight” rating and initiated an analyst price target of $85.00, a 22.1% upside of the then current price of $69.63.

On December 18, QIAGEN‘s Board authorized the repurchase of 2.5 million common shares. The company stated the repurchasing of shares would happen between December 19 and March 8, 2019, through the Frankfurt Stock Exchange. The purpose of repurchasing the stock is to store them in the company’s treasury and use them for their employee share-based compensation plans. The total purchase price for the stock is expected to be up to $70 million.

International Stocks

Asia Pacific equity indexes traded mostly lower in December, as Japan’s Nikkei 225 and Hong Kong’s Hang Seng sank 10.45% and 4.92%, respectively. Meanwhile, Singapore’s FTSE Straits Times was the only index with gains, rising 3.82%.

Prices for most of the Pacific Region companies in the IBO Stock Table dropped this month, led by Precision System Science, which slipped 18.8%. Conversely, Yunnan Energy (formerly Techcomp) rose 4.9%, respectively.

In other news, on December 5, Morgan Stanley gave Spectris an “overweight” rating and lowered its analyst price target from 2,850 pence ($37.24) to 2,800 pence ($36.59). In addition, on the same date, Morgan Stanley gave Halma an “equal weight” rating and lowered its analyst price target from 1,360 pence ($17.77) to 1,330 pence ($17.38).

On December 7, Techcomp announced a change of its company name to Yunnan Energy International Co. Limited. IBO will acknowledge the company as Yunnan Energy in future issues.

Scientific Digital Imaging announced its fiscal half-year financials on December 18, posting a 14.3% increase in basic EPS to 1.12 pence ($0.01).

The IBO Stock Indexes are weighted by marked capitalization. The Indexes’ averages for the financial ratios presented are also weighted statistically to reflect the relative sizes of the constituent companies. Laboratory Instruments and Products Index: 12/30/11 = 100. Diversified Laboratory Index: 12/30/11 = 100. Exchanges: n = NYSE; o = NASDAQ; t = Tokyo; hk = Hong Kong; l = London; g = Germany; s = Switzerland; st = Sweden; no = Nordic Market; os = Osaka Securities. N/A = not available; NM = not meaningful.  Click to enlarge