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Kuby’s Commentary

Getting Better

Jun 28, 2021

Last Week:

What a difference a weekend makes. The selling pressure from the previous Friday vanished into thin air, and a bounce-back rally kicked in on Monday morning that continued throughout the week. The S&P 500 closed Friday at another record high, posting its best weekly performance since February, as investors bought the party line from Federal Reserve Chairman Jerome Powell that the higher inflation will be temporary as the economy continues to rebound from the pandemic. Investors were also heartened by progress on a bipartisan deal for infrastructure, as President Biden and a group of Democrat and Republican senators reached an agreement on a nearly $1 trillion package. The S&P 500 rallied 2.7% for the week, the Dow gained 3.4%, the Nasdaq climbed 2.4%, and the Russell 2000 jumped 4.2%. The bond market weakened on Friday as core PCE inflation came in at the highest rate in nearly 30 years, but the damage was minimal with the Ten-Year Treasury finishing up just 10 basis points to 1.54%. The dollar ticked down while gold inched up. Oil and Gas stocks fared the best with crude oil advancing 3.4%, and Financials also rallied after all 23 banks passed the Federal Reserve’s stress test, paving the way for share buybacks and dividend increases. We still believe that overweighting the Financial sector and underweighting the Energy sector makes sense. So far, we have been right on the former and wrong on the latter.

We asked our summer interns to highlight the news items that they thought were most significant, and perhaps a song to go along with the story. The spike in the PCE inflation report was most frequently mentioned. Also noted was the historic surge in consumer spending, the largest rate growth since 1946, with clothing spending from consumers 35% higher than it was 2 years ago. It is estimated that 25% of consumers will also have to purchase new clothing given they require new sizing than before the pandemic. One intern (clearly a growth stock fan) noted, “In seeing tech stocks surge this week after having little movement for months, it represents to me how recovery is being recognized by the market and that the market is hinting at a return towards valuing tech and growth equities again.” Another intern highlighted the optimism over the prospect of additional fiscal stimulus, referencing “With a Little Help From My Friends” by the Beatles because of the government’s support and the resulting optimism of investors which helped boost the market. I would follow that song with “Getting Better”, also on the 1967 Sgt. Pepper’s Lonely Hearts Club Band. “I’ve got to admit it’s getting better (better), A little better all the time (it can’t get no worse)”.

This Week:

The Consumer Confidence Index on Tuesday and the jobs report on Friday are the two highlights of the economic calendar. Consumer Confidence is expected to be unchanged from the May reading, still substantially below pre-pandemic levels, while having rebounded sharply since the beginning of the year. The Index has two components: (1) The Present Situation Index—based on consumers’ assessment of current business and labor market conditions; and (2) the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions. At North Star, we view the Expectations Index as a better predictor of behavior. Turning to the employment report, the consensus is for 625,000 jobs to have been added in June, but recently the data has been extremely volatile, and the forecasts have been wildly inaccurate.

Stocks on the Move:

Companies with news…

+17.9% Apogee Enterprises Inc (APOG) designs and develops value-added glass products. The Company offers glass and aluminum windows, storefront and curtainwall systems, and glass for framed art and pictures. Customers include architects, general contractors, glazing subcontractors, and building owners. Last week, Apogee reported very strong Q1 2021 results of $0.42 per share and $326 million in quarterly revenue. Additionally, the Company raised its full-year earnings guidance along with management commenting on positive non-residential construction trends, fewer project delays, and progress made in its strategic transformation efforts.

APOG is a 1.0% position in the North Star Micro Cap Fund and a 1.3% position in the North Star Dividend Fund.

+12.8% Boot Barn Holdings Inc (BOOT) sells western and work gear for individuals and families. The Company sells boots, jeans, shirts, hats, belts, jewelry, and other accessories. Although there was no company-specific news this week, Boot Barn gained momentum after UBS raised estimates on a series of retail stocks citing strong consumer demand.

BOOT is a 5.1% position in the North Star Micro Cap Fund.

Companies without news…

+15.5% Westwood Holdings Group Inc (WHG) provides investment advisory services to a broad range of institutional clients. The Company also offers trust and custodial services to institutions and high-net-worth individuals. There was no significant company news this week.

WHG is a 1.1% position in the North Star Micro Cap Fund.

+21.4% Build-A-Bear Workshop Inc (BBW) is an interactive and entertainment mall-based retailer that invites guests of all ages to create their own customized stuffed animals with clothing, shoes, and accessories through a bear-making process. There was no significant company news this week.

BBW is a 2.8% position in the North Star Micro Cap Fund.

+12.6% 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. There was no significant company news last week.

RGCO is a 1.6% position in the North Star Dividend Fund.

+11.0% Pitney Bowes Inc (PBI) sells, finances, rents, and services integrated mail and document management systems. The Company offers a full suite of equipment, supplies, software, and services for end-to-end mail stream solutions. There was no significant company news last week.

PBI is a 0.9% position in the North Star Dividend Fund.


Have a great week, and remember, it’s getting better all the time.

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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