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Kuby’s Commentary

Bearing Down on Vaccine Clock

Sep 14, 2020

Last Week:

The Bears are back in action. On Wall Street the market labored to find its footing following the holiday weekend, with the S&P declining 2.5% to post its first back-to-back weekly loss in four months. The Tech sector had its worst week since March with the Nasdaq shedding 4.06%, but all ten sectors were in the red with the Energy sector posting a 6.86% loss as crude oil fell 6.1% to $37.33 a barrel. Consistent with the risk-off flavor of the week, the yield on the Ten-Year Treasury slipped 5 basis points while both the dollar and gold gained fractionally.

Meanwhile in Detroit, the Chicago Bears kicked off the NFL season with a thrilling come from behind win against the Lions. We like those Bears!

The latest data on the U.S. COVID-19 outbreak was “disturbing,” according to Dr. Anthony Fauci, with an elevated level of new infections and the number of deaths in the U.S. approaching 200,000, even as the number of daily new cases remains lower than the peak. Winter is coming and the timing of a vaccine remains uncertain. It’s not as certain that additional stimulus is coming, as the most recent “skinny” proposal failed to advance in the Senate.

The consumer-price index increased 0.4% in August; the third straight month of gains for consumer prices, after sharp declines at the pandemic’s onset. Any significant increase in the inflation rate would throw a wrench in the Fed’s “whatever it takes” strategy to support the economy.

This Week:

COVID-19 spread and treatments will remain the most important news stories, with some potentially positive developments to look for as AstraZeneca sets a timeline for restarting its vaccine clinical trial. In addition, Pfizer’s CEO Albert Bourla said it is “likely” the U.S. will deploy a COVID-19 vaccine before year-end. At the risk of stating the obvious, we all look forward to the commentary when the pandemic will be referred to in the past tense. Keep breathing and keep the faith. That day will come.

Tuesday is the deadline that President Trump set for ByteDance to divest its U.S. TikTok operations, with Oracle emerging as the likely acquirer. The relationship between the two largest global economies could deteriorate further as Trump pushes to “decouple” the U.S. from China. In contrast to the steep sell-off following the trade war rhetoric of 2018, the market in 2020 has largely ignored this conflict.

The FOMC will announce its monetary policy decision on Wednesday, with rates certain to remain near zero and additional commentary likely on the recently updated inflation policy.

Stocks on the Move:

GRBK +15.3%: Green Brick Partners Inc. acquires and develops land and construction financing to its controlled builders. The company is engaged in various aspects of the homebuilding process, including land acquisition and development, entitlements, design, construction, marketing, sales, and brand image creation. There was no significant company news this week. GRBK is a 1.15% holding in the North Star Micro Cap Fund

BGS -11.8%: B&G Foods Inc. is an American packaged-food manufacturer. The company sells its products in United States, Canada, and Puerto Rico. The company distributes its products through multiple channels to supermarkets, wholesalers, mass merchants, warehouse clubs, and foodservice distributors. There was no significant company news this week. BGS is a 2.35% holding in the North Star Dividend Fund, and BGS corporate bonds are a 3.52% holding in the North Star Bond Fund.

CNTY -11.8%: Century Casinos Inc. is a US-based international casino entertainment company. The company principally engages in the development and operations of gaming establishments as well as related lodging, restaurants, and entertainment facilities. Along with its land-based casinos, it also operates ship-based casinos on international and Alaskan waters. There was no significant company news this week. CNTY is a 0.95% holding in the North Star Micro Cap Fund.

FLWS -10.1%: 1-800-Flowers.com Inc. is a United States-based provider of gourmet food and gift baskets, consumer floral, and BloomNet wire service. The company offers products through omnichannel and multiple brands such as Harry & David, The Popcorn Factory, Cheryl’s, Fannie May, 1-800-Baskets.com, Wolferman’s, and Stock Yards. This week, founder Jim McCann sold 2% of his holding in anticipation of normal family tax and estate planning. As well as that, the company announced plans to hire more than 10,000 seasonal workers for the holidays. FLWS is a 3.60% holding in the North Star Micro Cap Fund.

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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