“And there’s reason to believe maybe this year will be better than the last.”
- David Einhorn, Founder and President, Greenlight Capital, Inc.

Happy Monday,

Overall, the S&P, Dow and Nasdaq were mixed in January following a strong December. The S&P went down 1.1%, the Dow decreased 2.0% and the Nasdaq accelerated 1.4%.

This is certainly evidence of the lower results we mentioned in our last Market Update in January. In our view, the markets are being driven mainly by our Covid-19 recovery prospects. At times, there have been optimistic feelings regarding the recent vaccine developments, but the uncertainty of timing and a possibility that variant strains of the virus will push our recovery backward is producing a mixed performance.

That said, we expect that Q1 ’21 will be a generally positive quarter. Most likely, the tech-heavy Nasdaq will outpace the Dow and we will begin to see the light at the end of the Covid-19 tunnel.

The S&P went down 1.1% to 3,714 in January, as the markets focused both on value investments and the hope for fast rollout of the Covid-19 vaccines to address the pandemic.
The Dow decreased 2.0% to 29,982 in January, as the markets continued the rotation into lower PE value investments, especially industrial and consumer staples.
The Nasdaq accelerated 1.4% to 13,070 in January, as Tech stocks recovered from the pullback in Q3 ‘20 and value stocks continued their slow rotate back into the limelight.

In January, the growing number of coronavirus cases in the world, and specifically in the US, along with the associated constraint on full-scale business re-opening in the US continued to stress investors’ minds. Investors have also begun to think about how the new Biden administration will adjust corporate and individual taxes in 2021.

Countering this negative news, M&A transaction volume continued strongly, and the Fed continued its unprecedented support of the economy. In addition, rollout of the Covid-19 vaccines has been very positive and the Housing sector continues to be a bright spot with strong consumer demand thanks to low interest rates.

In February, we believe the public markets will continue the slow rotation to lower PE industrial stocks. Overall returns will be positive, but mixed, with the tech-heavy Nasdaq outpacing the Dow. We believe that out-of-favor lower-PE Dow companies still represent a continued buying opportunity during the rest of Q1 ‘21. I especially like the Industrial sector where PE ratios are very reasonable, and growth in this sector should increase as the country opens back up for business. Verizon, Morgan Stanley, P&G, Walmart & Amazon all continue to be top selections as we view them as stronger and more nimble competitors in their respective sectors.

In our public portfolio in February, we continue to migrate into more quality equity investments at at superior values. Take a look at our latest TOP 10 investments list.

Thanks again for your consideration & for sharing your thoughts and ideas with us. Have a wonderful February and 2021 ahead!

With gratitude,
Marlene

Marlene Oddo
Partner
PointFour Capital, LLC