NEW YORK ( TheStreet) -- Everything is bigger in Texas, including stock returns, says Eric Marshall, manager of the Dallas-based Hodges Small Cap Fund ( HDPSX). Hodges owns a slew of Texas-based companies, including Kirby Corp. ( KEX) and Bristow Group ( BRS).The mutual fund, which garners one out of five stars from Morningstar ( MORN), has returned 23% over the past year, compared with 15% for its peers. The Hodges Small Cap Fund is in the top 10% of its category over one week, one month, three months, year to date and one year. The economy is struggling in a lot of different parts of the country, yet the economy in Texas seems to be doing quite well. Why is that? Marshall: I would mention less regulation and lower taxes as primary reasons. And from a purely geographical standpoint, Texas is positioned to benefit from a lot of international trade. And then I would also add that energy prices are helping things. Why do you like inland barge operator Kirby Corp.? Marshall: They are certainly benefiting from an improving economy. Barge utilization rates are back up to about 85%. They are the largest operator in the United States, benefiting from a high demand for petrochemicals and really tied to the recovery in GDP. They are going to do very well in this stage of recovery. We like the valuation. They have also made a couple of acquisitions that we think will provide incremental ways for the company to grow. Bristow Group is a company that transports oil workers back and forth from the rigs at sea. How leveraged are they to the price of oil? Marshall: This is an oil-service company that you don't hear a whole lot about but they are uniquely positioned. They are not necessarily tied to the price of oil so they can do well whether the oil is at $80 a barrel or whether oil is at $150 dollars a barrel. And only about 20% of their business is in the Gulf of Mexico. They are actually diversified all over the world so as energy demand continues to increase, they should do very well.
A lot of people are worried about a double dip in the economy. If it does slow down again, what does that mean for railcar-maker Trinity Industries (TRN)? Marshall: Trinity is very well-positioned. During the recession, you went through a two- or three-year period where rail car orders had really been in decline. There has been a replenishment of demand under way. You've started to see order rates rise. Also, if you look at the railroad car loadings rates, they've actually increased dramatically and that should be a good thing for their business over the next year. If the housing market doesn't rebound, what does that mean for Encore Wire (WIRE)? Marshall: Encore Wire is uniquely positioned as the second-largest building wire manufacturer and a low-cost provider. We don't think they necessarily need a rebound in housing or commercial construction to do well. There were a lot of high-cost, less-efficient competitors out there that went out of business. That's put Encore Wire in a position where they are actually seeing nice volume increases, pricing increases, and margin improvements, without the recovery in housing. We think once housing does improve, they will do even that much better. -- Reported by Gregg Greenberg in New York.
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