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Kuby’s Commentary

What a Week

Jan 11, 2021

Last Week:


The Wall Street party raged on as the S&P 500 rose 1.8%, to 3824.68, Nasdaq Composite gained 2.4%, and the Russell 2000 surged 5.9%. It was the best start to a year for small caps since 1987 (causing a party on North Star Street).

On the other hand, partygoers found a sober and somber setting on Bourbon Street, Rush Street, and other restaurant and bar hot spots. New COVID-19 restrictions translated to 372,000 bartenders, hostesses, and servers losing their jobs in December, resulting in an overall drop in employment of 140,000 for the month.

On Tuesday, voters in Georgia elected the two Democrats to the Senate, swinging the balance of power in Congress. The market appears to be viewing the results as a Goldilocks election; hot enough for swift additional stimulus, while cold enough to block big tax increases. I tend to recall from my economics classes at the University of Chicago 40 years ago that the government payments and revenues ultimately need to match but let us kick that can down the road again.

On Wednesday, Trump supporters stormed the Capitol building, intent on blocking the certification of the presidential election results. I am not going to go into any more details, as certainly everyone knows what followed. It was a deeply disturbing day that hopefully will mark the nadir of the political environment in our beloved democracy.

Throughout the week, COVID-19 cases and deaths surged to new record levels, while the distribution of the vaccines proceeded at a glacier-like pace.

The yield on the Ten-Year Treasury shot up 20 basis points to 1.1%, its highest level since the pandemic hit. We continue to caution that these rates can go much higher very quickly, and therefore advise keeping your bond maturities short. The Ten-Year yield reached 3.2% in November 2018, before Fed Chair Jerome Powell unleashed the Central Bank’s no holds barred bond-buying program to support the economy. The steepening of the yield curve in an improving economy would be favorable for the Financial stocks, as such we continue to overweight that sector.

The New Orleans Saints ended the Bears 2020-2021 season on Sunday by a score of 21-10. The most interesting feature of the game was that it was televised on Nickelodeon. I guess “ESPN The Ocho” had already committed to Dodgeball (2004 movie reference).

This Week:

House Democrats plan to introduce their impeachment resolution on Monday, although it seems unlikely that the Senate would take up any articles of impeachment.

COVID-19 cases and deaths are expected to be elevated in the aftermath of the holiday get-togethers.

Earnings season will kick-off with 9 S&P 500 companies reporting results. Wall Street expects another down quarter, with S&P 500 earnings forecasted to have dropped 8.8% in the final three months of 2020 versus the same period in 2019.

Stocks on the Move:

+13.4% CarParts.Com Inc (PRTS) retails automobile parts online. The Company offers mirror, engine, headlights, brakes, interior and exterior accessories, tools, wheels, lighting, bumpers, and other auto body parts. There was no significant company news this week. PRTS is a 5.2% holding in the North Star Micro Cap Fund

 +11.3% A. H. Belo Corp (AHC) prints and publishes newspapers. The Company offers marketing solutions, niche publications, commercial printing, and direct mail services.  This week, there was no significant company news. AHC is a 1.3% holding in the North Star Dividend Fund. 

+17.1% Global Water Resources Inc (GWRS) operates as a water resource management company. The Company owns and operates regulated water and wastewater utilities, as well as promotes water-saving and usage practices. Global Water Resources serves customers in the State of Arizona. This week, the Company announced it had entered into a master utility agreement with Nikola Corporation (NASDAQ:NKLA) to provide its services to Nikola’s new manufacturing plant in Coolidge, AZ. GWRS is a 3.3% holding in the North Star Dividend Fund.

+11.4% Healthcare Services Group Inc (HCSG) provides housekeeping, laundry, linen, facility maintenance, and food services. The Company offers its services to the health care industry, including nursing homes, retirement complexes, rehabilitation centers, and hospitals. There was no significant Company news this week. HCSG is a 3.0% holding in the North Star Dividend Fund.

+12.2% 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. This week, there was no significant company news. PBI is a 1.1% holding in the North Star Dividend Fund, a 0.4% holding in the North Star Opportunity Fund, and a 3.7% holding in the North Star Bond Fund.

+12.1% 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. This week, shares rose as the retailer forecasted better than expected results with comparable sales for the quarter rising 4.6% and preliminary FQ3 sales of $302.3M. BOOT is a 3.9% holding in the North Star Micro Cap Fund.

+14.7% Lakeland Industries Inc (LAKE) manufactures and distributes protective work clothing. The Company offers disposable, chemical, cleanroom, hand, arm, fire, and heat-protective clothing. This week, Lakeland Industries appointed Steven L. Harvey to the newly created position of Executive Vice President for Global Sales and Marketing. LAKE is a 1.3% 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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