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Kuby’s Commentary

A Solid Finish

May 1, 2023


The market suffered from an SVB aftershock early in the week, as banking concerns resurfaced after First Republic Bank (FRC) revealed a continued deposit outflow. First Republic, the 14th largest bank in the U.S., relied on wealthy customers with large balances among its depositors. Those customers were tremendously profitable for the bank, which posted record earnings of $1.7 billion in calendar 2022. Those same customers were quick to withdraw their money, as depositors took notice that First Republic had some two-thirds of its deposits in uninsured accounts.

“With the closure of several banks in March, we experienced unprecedented deposit outflows,” First Republic said Monday. Deposits are the lifeblood of a bank, and, as we learned in “It’s a Wonderful Life”, it’s the beginning of the end for a bank when customers line up to withdraw their money. The official end for First Republic came over the weekend as regulators took possession of the bank and Jamie Dimon’s JPMorgan Chase & Co (JPM) acquired all its deposits and substantially all its assets. This recent banking crisis is playing out in a Darwinian fashion with the survival of the fittest. We believe that intriguing investment opportunities have been created in the universe of the nearly 99% of “surviving” financial institutions, spanning the spectrum from mega caps like JPM down to small caps like Chicago-based Wintrust Financial Corp (WTFC).

The good news is that stocks bottomed on Wednesday with solid gains on Thursday and Friday that left the S&P 500 up 0.9% and the Nasdaq Composite ahead 1.3% while small caps still finished in the red with the Russell 2000 declining 1.3%. Stronger than expected corporate earnings reports – particularly from several big tech companies including Alphabet Inc (GOOGL), Microsoft Corp (MSFT), and Meta Platforms Inc (META) – fueled the gains. The resilient albeit modestly softening economic data helped as first quarter GDP came in at +1.1%, and U.S. employment cost index, the Fed’s preferred inflation gauge, rose 1.2%.

The bond market was quiet with the yield on the 10-year Treasury slipping 12 basis points to 3.45%, while the 2-year yield dropped slightly more and finished at 4.03%. The currency and commodity markets were also stable, with the dollar, gold, and oil, all essentially unchanged.


It should be quite an interesting week with 162 S&P 500 companies reporting results for the first quarter, the FOMC announcing its monetary policy decision, and the BLS releasing the JOLTS (Jobs Openings and Labor Turnover Survey) on Wednesday and the unemployment report for April on Friday.

Earnings season has progressed better than expected with the blended earnings decline for the quarter now forecasted at 3.7% versus 6.7% on March 31, including most of that improvement coming last week.

The odds are heavily favoring another 25-basis point increase to 5.25%, its highest level since 2007, in the federal-funds rate on Wednesday. We think they have gone too far too fast after not moving at all for way too long. If they do make that hike, hopefully their statement will clearly indicate a pause with the possibility of cutting rates later in the year if the economic data suggests it is warranted.

The jobs data will likely show a significant decline in jobs openings, a small increase in nonfarm payrolls, and a slight uptick in the unemployment rate.

On the Chicago sports scene, most of the excitement is over the Bears’ draft picks, as the baseball season seems hopeless, and both the Bulls and Blackhawks have enjoyed an early beginning to the offseason. The Cubs do seem to be modestly exceeding expectations, but nevertheless already trail the Pirates and the Brewers by 5 and 3.5 games, respectively. The White Sox matched the Bears’ 10 game losing streak on Saturday after blowing a 3-0 lead on the way to losing 12-3 to the Tampa Bay Blue Jays.

Stocks on the Move

+14.4% Accuray Inc (ARAY) designs, develops, and sells advanced radiosurgery and radiation therapy systems for the treatment of tumors throughout the body. Last week, ARAY reported fiscal third quarter earnings per share of $0.01 and revenue of $118M. New order numbers were very strong, and the Company delivered a record number of 30 systems during the period. In addition to anticipated growth in North America, management sees Asia improving rapidly over the next few quarters.

+13.3% Tennant Company (TNC) designs, manufactures, and sells non-residential floor maintenance equipment, floor coating, and related products. The Company’s products include scrubbers, sweepers, extractors, burnishers, buffers, floor coatings, and full-service equipment support. TNC reported very solid 1Q23 results last week with $1.45 in EPS beating by $0.61 and revenue of $305.8M (+18.5% y/y) beating by $33.27M. The quarter benefited from stronger margins and reduced inventory as the Company worked through its backlog.

-10.2% RGC Resources Inc (RGCO) and its subsidiaries distribute and sell natural gas and propane. The Company serves residential, commercial, and industrial customers in the Roanoke Valley and Bluefield areas of southwestern Virginia, as well as southern West Virginia. Last week, Energy Secretary Jennifer Granholm sent a letter to the Federal Energy Regulatory Commission urging the organization to expedite the permitting of the Mountain Valley Pipeline. RGCO is a co-developer on the project. Additionally, RGCO declared its regular quarterly dividend of $0.1975/share.

-14.4% Inc (FLWS) is an e-commerce provider of floral products and gifts. The Company’s product offerings include fresh-cut and seasonal flowers, plants, floral arrangements, home and garden merchandise, and gift baskets. There was no significant news last week.

-10.6% Napco Security Technologies Inc (NSSC) manufactures electronic security devices, fire detection products, access control systems, and digital lock equipment used in residential, commercial, institutional, and industrial installations. There was no significant news last week.

+14.2% Rocky Brands Inc (RCKY) designs, develops, manufactures, and markets men’s and women’s footwear. Its footwear brands, which are sold in retail sporting goods and outdoor stores, include Rocky, Georgia Boot, Creative Recreation, Durango, Lehigh, Honeywell, XTRATUF and licensed brand Michelin. There was no significant news last week.

-11.0% Orion Energy Systems Inc (OESX) manufactures, sells, installs, and implements energy management systems for commercial office and retail, exterior area lighting, and industrial applications in North America. It offers interior light emitting diode (LED) high bay fixtures; smart building control systems; and LED troffer door retrofit for use in office or retail grid ceilings. In addition, it provides lighting-related energy management services, such as site assessment, utility incentive and government subsidy management, engineering design, project management, and recycling. There was no significant news last week.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

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