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Kuby’s Commentary

Like a Bull

Mar 4, 2024

Sound Shape

In weather parlance, March is said to come in like a lion and go out like a lamb. For the stock market, March came in like a bull!

The S&P 500 and Nasdaq Composite closed at fresh record highs, primarily driven by tech stocks with a kiss from some consumer-related issues. Declining Treasury yields provided a boost, as softness in factory data and a slip in consumer sentiment renewed expectations for interest rate cuts from the Federal Reserve by this summer. The 10-year Treasury yield fell eight basis points to 4.18%, while the yield on the 2-year shed 12 basis points to 4.53%. Additionally, Corporate earnings continued to exceed expectations. The combination of the declining interest rates and the rising earnings underscores the investment rationale for stocks pushing to new highs.

Stocks gained even as troubled New York Community Bancorp plunged 25% after disclosing material weaknesses in internal controls related to its loan review. Thus far, NYCB’s troubles have not led to a sell-off in the regional bank index, which is in sharp contrast to the sector-wide tumble in March 2023 following Silicon Valley Bank’s disclosure of troubles. This doesn’t mean every bank is in sound shape. For example, Republic First Bank, a Philadelphia-based institution (not the similarly named First Republic of early 2023 sell-off fame, and now a part of J.P. Morgan), lost a deal for an equity infusion to shore up its capital requirements adequacy.

Small caps led the leaderboard during the week, with the Russell 2000 jumping 2.9%. The Nasdaq added 1.7%, and the S&P advanced 0.9%, registering their seventh positive week out of the past eight. Trading volume was heavy, and advancing issues outnumbered declining issues by a factor of 3-2. Crude oil gained almost 5%, and gold pushed 1.5% higher to its highest level on record. Crude is approaching $80/barrel while gold is knocking on the $2100 door.

There is not much to report on the Chicago Sports Scene. We do note the enthusiasm our North Side friends and clients are exhibiting over the upcoming Cubs season with the highly regarded (and paid) Craig Counsell as their new manager.

Fresh Look

Earnings season will conclude with a scattering of companies reporting results, including Target, Kroger, and Costco, which should provide a fresh look at the health of the U.S. consumer.

On Friday, the BLS will release the jobs report for February with the consensus estimate calling for an increase of 200,000 in nonfarm payrolls. The jobs data from the BLS has recently offered multiple surprises, including the 353,000 jobs added in January, more than double expectations. Given annual adjustments to data collection and calculation methodologies, we are more interested in some of the details that tend to be forward indicators, including “Average Weekly Hours of All Employees,” which has been in steady decline since peaking in March 2021 (see graph below). We also care about “Average Hourly Earnings of All Employees,” which was stubbornly stuck above 5% annual growth in most of 2022 but has recently been decelerating to the low 4% area. Stay tuned, as the vital jobs data has given the Fed the rope to keep rates higher than necessary.

February Stocks on the Move

+40.6% Comfort Systems USA Inc (FIX) posted strong fourth quarter results highlighted by 22% topline growth and EPS of $2.55 exceeding estimates by $0.37. Numerous positive earnings revisions followed the release. The quarter was driven by an active industrial/manufacturing/technology/data center applications pipeline, improving gross margins from services revenue, and meaningful free cash flow generation.

+28.9% Boot Barn Holdings Inc (BOOT) rose in February despite posting mixed results and lowering guidance during its fiscal third-quarter earnings call. Supply chain costs have normalized, and store growth will remain strong for the remainder of the year and the near term.

+26.7% Interface Inc (TILE) reported notable fourth-quarter results that showed accelerated share gains in the corporate office market and momentum in gross profit expansion.

+22.2% Flexsteel Industries Inc (FLXS) shared in-line fiscal second-quarter results with robust sales and order growth, supply chain cost improvements, and disciplined pricing/product portfolio management.

+16.7% Tennant Company Inc (TNC) climbed in February on an earnings beat and news that it had signed an agreement with Brain Corp to invest $32 million in developing the next generation of AI-enabled robotic cleaning machines.

-16.7% Thermon Group Holdings Inc (THR) sank last month after cutting its FY24 earnings guidance due to abnormally warm winter conditions and weak Canadian macroeconomic conditions. We believe THR still represents a good long-term play on energy transition and decarbonization.

-16.1% Century Casinos Inc (CNTY) ended the month down after announcing preliminary fourth-quarter results that estimated a net loss between $9.8 million and $13.6 million for the period. Management commented that they expect 2024 to be a transitional year for the company. Full results are anticipated to be released on March 14th.

-14.5% Cracker Barrel Old Country Store Inc (CBRL) was challenged throughout the month of February. Share price declines continued into the month after the company’s fiscal second-quarter earnings call, highlighting improved traffic and pricing strategies.

-13.4% Axcelis Technologies Inc (ACLS) shares have trended down as investors continue to rotate out of names with heavy exposure to China. However, the company continues to execute on growing the top and bottom lines and will benefit from further industry recovery.

-13.2% Denny’s Corp (DENN) sank during the month after posting a slight earnings miss and providing disappointing same-store-sales growth guidance for FY24.

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

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