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Kuby’s Commentary

Mixed Bag

Jan 18, 2021

Last Week:

It was a mixed bag of tricks and treats for stocks, with the S&P 500 suffering its worst decline since Halloween at -1.5%, while the Russell 2000 gained 1.5%, and 1827 advancing issues outnumbered 1402 decliners.  The dollar, gold, and interest rates were all largely unchanged. I guess you could call it a “quiet” week in the market.

The economic data continued to soften, with Retail Sales for December declining 0.7% and weekly initial claims for unemployment spiking to its highest level since August. COVID-19 cases and deaths remained elevated, while the vaccine roll-out remained significantly behind schedule.

It was not quiet in the Capitol. On Wednesday, the House voted to impeach President Donald Trump, but the Senate trial will not take place until after the change in administration. On Thursday night, President-elect Joe Biden unveiled a $1.9 trillion economic stimulus plan, effectively restarting the debate which has been in the news for most of the last six months.

This Week:

The market will be closed on Monday in observance of Martin Luther King Jr. day. It is amazing how timely Dr. King’s words remain in 2021. The pandemic certainly highlighted this truth, “Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” Moreover, given the violent turn of events over the last year, it is worth reflecting on these words of wisdom, “The limitation of riots, moral questions aside, is that they cannot win and their participants know it. Hence, rioting is not revolutionary but reactionary because it invites defeat. It involves an emotional catharsis, but it must be followed by a sense of futility.”

When the market reopens on Tuesday, earnings season will pick up steam, with forty S&P 500 companies reporting results. The consensus now calls for a decline of 6.8% in fourth quarter results, which is an improvement from the -12.8% forecast two weeks ago. If the consensus proves correct, it will mark the seventh time in the past eight quarters in which the index has reported a year-over-year decline in earnings.

The economic calendar brings reports on housing starts, manufacturing PMI and existing home sales, all of which have been exhibiting good strength in spite of the pandemic.

On Wednesday, Joe Biden will be sworn in as the 46th U.S. president. The immediate focus will be on passing the $1.9T stimulus package and combatting COVID-19 by improving the vaccine distribution and emphasizing mask-wearing and social distancing protocols.

Stocks on the Move:

+13.1% ViacomCBS Inc (VIAC) operates as a multimedia company. The Company provides television and radio stations, produced and syndicates television programs, broadcasting, publishes books and online content, as well as provides outdoor advertising. This week, ViacomCBS’s stock rose due to strong ad trends and increased price targets. Additionally, the Company completed a multi-year renewal across its 13 CBS network affiliations for Sinclair Broadcast Group (SBGI) stations. VIAC is a 4.4% holding in the North Star Opportunity Fund.

+16.1% A.H. Belo Corporation (AHC) prints and publishes newspapers. The Company offers marketing solutions, niche publications, commercial printing, and direct mail services. There was no significant company news last week. AHC is a 1.5% holding in the North Star Dividend Fund.

+23.7% ARC Document Solutions Inc (ARC) designs, builds, and operates printing and technology solutions for various industries, like retail and architecture. Last week, the Company announced two new US patents that optimize data transfers and synchronization of information for accessing critical building information. ARC is a 0.1% holding in the North Star Micro Cap Fund.

+21.7% Blue Bird Corporation (BLBD) designs and manufactures school buses. The Company provides alternative fuel applications through propane-powered and compressed natural gas-powered school buses. There was no significant company news last week. BLBD is a 2.1% holding in the North Star Micro Cap Fund.

+17.3% 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 products. Last week, Wells Fargo lifted FY21-FY22 estimates on BOOT, citing the Company as one of the more compelling small-cap growth names. BOOT is a 4.5% holding in the North Star Micro Cap Fund.

+11.3% Century Casinos Inc (CNTY) operates as an entertainment company. The Company owns casinos, hotels, resorts, and luxury cruise vessels. Last week, the Company announced it would close its Polish Casinos through January 31, a segment that contributed 4% of CNTY’s adjusted EBITDA in Q3FY2020. CNTY is a 0.8% holding in the North Star Micro Cap Fund.

+11.1% Denny’s Corporation (DENN) operates as a full-service family restaurant chain directly and through franchisees. The Company manages restaurants under the Denny’s name in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. Last week, Denny’s announced domestic same-store sales decreased 33% for the full Q4FY2020. DENN is a 1.8% holding in the North Star Micro Cap Fund.

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