Investing in Your Backyard: The Big Easy

Break out the crawfish and the Turbodog -- it's backyard investing time!

There are many good reasons for researching investment opportunities in a certain geographic area. Mardi Gras wraps up weeks of parades, parties, and balls on Fat Tuesday next week, so I'll get you primed for the big day with a look at the New Orleans business district.

NOLA is known for its music, its food, its architecture, its gumbo of cultures, and its laid-back Caribbean attitude. For most of its history, the city was also the commercial capital of the South. But with plane, train, and truck traffic having replaced Mississippi riverboats these days as the preferred way of distributing goods, New Orleans lost that title to places like Atlanta and Memphis. By the time Hurricane Katrina washed much of the city away, only 23 publicly traded companies called the Big Easy home. Today, about 17 months later, there are only 16. Considering that the metro area lost well over 30% of its population to the storm, the American sector is pulling its weight.

If you happen to live in the greater New Orleans area, you already have a few advantages when it comes to evaluating the local market, such as access to local news sources and the word on the street, and a high probability of being a customer or employee of these companies. And if you're not a local resident, you might still want to know whether the business climate matches the Carnival love buzz.

Without further ado, here are the largest companies headquartered near the mouth of the Mississippi River:

Company

Market Cap (billions)

CAPS Rating

Bull Ratio

Entergy (NYSE: ETR  )

$20.1

***

84%

Freeport-McMoRan Copper & Gold (NYSE: FCX  )

$11.4

****

95%

Tidewater (NYSE: TDW  )

$3.0

***

93%

Superior Energy Services (NYSE: SPN  )

$2.3

*****

99%

Whitney Holding (Nasdaq: WTNY  )

$2.2

Not rated

0%



Wait, wasn't this last week's lineup?
You can tell right away what powers the NOLA economy: Gulf oil. Fully half of the 16 companies my Capital IQ screen found (and three of the top five market caps) operate in the energy sector. It's like a smaller version of Houston, only with direct access to the Mississippi for extra shipping options.

Entergy is a major electricity provider, but it hedges against oil problems with other power sources. All-star CAPS player Uther606 explains:

"The retail business in the Gulf South is growing and the post-Katrina rebuilding is producing a better infrastructure. Nuclear energy is an often-overlooked alternative to oil."

Offshore energy transport specialist Tidewater has CAPS players shouting "sector" and "value" with glee. And everybody loves oilfield services provider Superior Energy Services -- except Jim Cramer, who provides the only thumbs-down out of 112 players and tracked analysts. It's another "sector" play, this time with a very attractive PEG ratio -- 0.34 as of this writing.

Hold the energy, please
The top five is rounded out by acquisitive mining company Freeport McMoRan, which earns its four stars from high demand on copper coming out of China and India, as well as solid gold-mining operations, and regional banking operator Whitney Holdings, which hasn't gotten enough player ratings to earn any stars at all so far.

There are two more five-star stocks based in New Orleans, besides Superior Energy, and they're both energy-related. Newpark Resources (NYSE: NR  ) is a fine drilling support service on its own, but it also sells patented drill lubrication solutions to the competition. And it's hard to find a negative word said about platform builder Gulf Island Fabrication, based in nearby Houma.

On the other hand, market caps drop off dramatically beyond the upper crust just presented. Ten of the local tickers represent caps smaller than $1 billion today. The average company here pulls in a svelte $235 million in annual net income but carries $872 million of long-term debt on the books.

It doesn't help that some of the brightest stars left the area after Katrina, including Ruth's Chris Steakhouse, which had gone public just three weeks before the storm. Others are doing the opposite, though. For example, oil giant Chevron (NYSE: CVX  ) may not have its headquarters in NOLA, but it did set up residence in the desperately de-bizzed downtown area just months after the disaster.

The Foolish bottom line
As long as energy matters, New Orleans will matter, too. Its location at the end of the Mississippi and right next to major fossil-fuel resources in the Gulf of Mexico makes it impossible to ignore. New Orleans has also become a vital crossroads for the nation's pipeline network.

And all of that black gold attracts other hopeful business owners, too. There might not be a lot of fais-do-do-ing going on in the business district, and there have been mumblings about Entergy leaving town for Jackson, Miss. -- as unlikely as that sounds. But it's way too early to hose the streets down, as there's still so much carnival left to love. Three five-star stocks out of 16 is a very impressive count, and this queen of a city won't give up her tiara anytime soon.

Do you agree? Disagree? Feel free to weigh in on the New Orleans market -- or on any stocks at all, really -- by joining Motley Fool CAPS and blasting away with your ratings and commentary pitches. And if the Crescent City isn't your 'hood, maybe we'll come around where you live next time.

Further Foolishness:

Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he needs a shrimp Po' Boy RIGHT NOW. You can check out Anders' holdings if you like. Foolish disclosure is always hotter than a bottle of Tabasco.


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