Last Week
The New Year got off to a sluggish start as uncertainty over the economic effects of the incoming administration’s policies and concerns about the recent hawkish monetary policy tilt weighed on sentiment. December proved to be an anticlimactic finish to a fantastic year in the stock market, as stocks drifted lower for the month and on Tuesday, the final trading day of 2024. Nevertheless, the S&P 500 posted an advance of +23.31% for the year and delivered back-to-back annual gains of more than 20% for the first time since 1998. Stock prices edged lower on Thursday, the first trading day of 2025, but rallied sharply on Friday to close out the week slightly in the red, with the S&P 500 and Nasdaq Composite both -0.5%. Small Caps outperformed, with the Russell 2000 posting a 1.1% gain. We continue to believe that the stage is set for a broadening out of the rally to include the bargain-priced Small Caps and Value sectors of the market. The bond market was steady, as the yield on the 10-year Treasury remained stable at around 4.6%, which marks its highest level in over 15 years.
On the Chicago Sports Scene, the Bears closed out the season with a 24-22 win over the Packers at Lambeau Field. Meanwhile, the Bulls won three of their last four games. A long way from “We are the Champions,” but perhaps “Don’t Stop Believing” is in the queue.
This Week
It will be the third week in a row of shortened trading as the market will be closed on Thursday in honor of former President Jimmy Carter.
The economic calendar is fairly busy with the U.S. jobs report for December on Friday in focus. Consensus estimates suggest nonfarm payroll growth of around 150K for the month, down from 227K in November. This release could carry weight as the Fed contemplates further interest rate cuts.
Additionally, the minutes from the Federal Reserve’s mid-December meeting are scheduled for release on Wednesday, while durable goods orders and services PMI data will be available throughout the week.
Stocks on the Move
+191.9% Flexsteel Industries Inc (FLXS) was a top performer this year, outpacing peers dampened by sluggish residential furniture demand. In 2024, FLXS quadrupled earnings, increased revenue every quarter, improved its balance sheet to net cash territory, and expanded its focus on product innovation. Shareholders were also rewarded with a nice bump to the quarterly dividend to $0.17/share from $0.15/share, marking the company’s first dividend increase since 2021.
+188.4% United States Lime & Minerals Inc (USLM) enjoyed solid financial results in 2024, highlighted by double-digit revenue growth and positive margin expansions, primarily due to easing fuel costs. Additionally, severe weather throughout the US created more demand from construction customers, especially for key limestone products like roof shingles.
+104.5% Build-A-Bear Workshop Inc (BBW) continues to be a top performer with a winning strategy. The company has achieved strong store economics and grown its portfolio of world-class licensing relationships. This unique entertainment company still trades at a modest 12x forward P/E multiple, and we look forward to further impressive execution by the management team.
+106.9% Comfort Systems USA Inc (FIX) had a great year marked by record earnings and cash flow. The HVAC installation and maintenance services company is set up in 2025 to benefit from reshoring and AI data center buildouts.
+94.5% Boot Barn Holdings Inc (BOOT) is a top retailer in the western and country lifestyle category with 425 stores and 8.4 million customers enrolled in its loyalty program. CY2024 was highlighted by consistent same-store sales growth and margin expansion from higher exclusive brand penetration combined with lower fixed costs.
+87.6% Liquidity Services Inc (LQDT), an e-commerce solutions provider of excess inventory and capital equipment, saw strong free cash flow and business trends in 2024 with increased service offerings and technology driving market share expansion.
-30.1% Movado Group Inc (MOV) shares struggled in 2024 due to cautious retailer ordering and weakness in European watch markets. With almost $100M in net cash and a 7.0% dividend yield, we believe Movado’s high-quality brands will benefit from normalizing channel inventory patterns.
-36.1% Johnson Outdoors Inc (JOUT) saw declines but stayed afloat in 2024 as the company also dealt with stubborn retailers, soft consumer demand, and a more competitive promotional environment. Until demand normalizes, the company is focused on cost savings and more sophisticated production planning. In the meantime, shareholders may see meaningful annual dividend increases, as laid out by the management’s capital allocation plan.
-46.1% Axcelis Technologies Inc (ACLS), a semiconductor fabrication equipment company, remains well positioned despite navigating sluggish dynamics in industrial and automotive end-markets.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvestfunds.com.