Kuby's Commentary

Overdue or Overdone

2018-04-24T15:26:17+00:00April 2nd, 2018|

Last Week:

A rally on Thursday capped off a volatile holiday-shortened week, and left the equity indices in the green, with the S&P 500 posting a 2.03% gain. Technology stocks drove most of the swings, as the debate raged between the the sector sell-off being “overdue” or “overdone”. Facebook attracted most of the media attention, as the company came under fierce attacks for their data practices. Nevertheless, the Company’s shares managed to eke out a small gain for the week. The yield on the Ten-Year Treasury dropped 9 basis points to 2.74%, its lowest level since February 6th, which was one week after the strong wage growth number that triggered a rise in rates and a decline in stocks from their all-time highs.

This Week:

The Bureau of Labor Statistics posts the March employment report on Friday. The January report seemed to trigger the volatility in the market, while the February report calmed the inflation hawks. Consensus estimates are for a rise of 180,000 jobs and average hourly wages rising 2.7% year over year. Too hot a number could create a repeat of the spike in rates and sell-off in stocks that followed the January report, while too cold a number could possibly lead to a yield curve inversion and empower the recession Casandras.

Stocks on the Move:

Movado Group, Inc. (MOV) +20.2%: Efraim Grinberg, Chairman and Chief Executive Officer, stated, “We are pleased with our strong end to the year highlighted by fourth quarter sales growth of 14.1%, adjusted operating income growth of 93.5% and an increase in adjusted EPS to $0.52. The strength of our owned and licensed brands continued to drive our performance in the fourth quarter, buoyed by accelerated growth in our subsidiaries in the UK, France and Germany, and the contribution from Olivia Burton. We were also very pleased to record a 6.4% increase in comparable sales for our Movado Company Stores for the quarter. Our fourth quarter performance continues to demonstrate the power of our brands around the world and the strength of our organization. As we focus on expanding our online presence given an evolving retail landscape, we are encouraged by the progress made in the quarter with our digital initiatives in support of our global portfolio.” Mr. Grinberg concluded, “Given our strong balance sheet, including $214.8 million of cash, combined with the expected benefit from tax reform, we are pleased that today our Board approved an increase in our regular quarterly dividend to $0.20 per share.” Movado designs, sources, markets and distributes fine watches. Its brands include Coach Watches, Concord, Ebel, ESQ Movado, Scuderia Ferrari Watches, HUGO BOSS Watches, Juicy Couture Watches, Lacoste Watches, Movado, and Tommy Hilfiger Watches. The North Star Micro Cap fund holds a 3.5% position in MOV.

NAPCO Security Technologies, Inc. (NSSC) +15.8%: Announced that Pepperdine University has ordered over 400 Trilogy Networx Locks for use on its campus in Malibu, CA. Pepperdine University has recently placed the order for these locks and installation in currently ongoing. The university has previously completed the installation of NAPCO products in its student dormitories as well as its library and administration buildings. Over the past few years Pepperdine has now installed NAPCO products in three different projects, which demonstrates the university’s commitment to school safety as well as the very positive opinion they have with respect to the performance of NAPCO products in protecting the students and staff on its campus. Richard Soloway, CEO of NAPCO commented, “Our relationship with Pepperdine University continues to be a very positive one and we are excited that for the third time they have chosen to use our products in their campus buildings. NAPCO is committed to the effort of making our schools safe for both students and the staff. Our school safety product offering has something that can fit every school’s budget, whether a university such as Pepperdine or a small elementary school. The school safety vertical continues to be a paradigm shift for the Company and we expect it to continue in the future years ahead.” NAPCO is engaged in manufacturing of security products, encompassing access control systems, door security products, intrusion and fire alarm systems and video surveillance products. The North Star Micro Cap fund holds a 1.2% position in NSSC.

Other companies experiencing large price movement, without any specific news, were Alaska Communication Systems, Inc. (ALSK) -11.8%, Flexsteel Industries, Inc. (FLXS) +13%, and NTN Buzztime, Inc. (NTN) +21.9%.

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