“Experience is making mistakes and learning from them.”
- Bill Ackman, Founder and CEO, Pershing Square Capital

Happy Monday,

Overall, the S&P, Dow and Nasdaq were all up modestly in February following a weak January. The S&P went up 2.6%, the Dow increased 3.2% and the Nasdaq accelerated 0.9%.

In our view, the markets are being driven mainly by our Covid-19 recovery timetable. There is now a generally optimistic feeling regarding the recent vaccine developments, but the uncertainty of timing and the possibility that variant strains of the virus will push our recovery backward is producing a lumpy performance. It would not surprise us if the market continued to be a bit uncertain, with small pull-backs becoming a regular event.

That said, we expect 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, but the Dow will not be too far behind.

The S&P went up 2.6% to 3,811 in February, 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 increased 3.2% to 30,932 in February, as the markets continued the rotation into lower PE value investments, especially industrial and consumer staples.
The Nasdaq accelerated 0.9% to 13,192 in February, as Tech stocks recovered from recent pullbacks and value stocks continued their slow rotation back into the limelight.

In February, 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. But, importantly, Covid-19 infections, hospitalizations, and deaths in the U.S. have all been trending lower. Investors have also begun to think about the prospects of passing the $1.9T Recovery Plan proposed by the Biden administration.

Additionally, 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 steady and the Housing sector continues to be a bright spot with strong consumer demand thanks to low interest rates.

In March, we believe the public markets will continue the slow rotation to lower PE industrial stocks. Overall returns will be positive, but mixed. We adjusted the cash portion of our public equities portfolio to 15% in March. 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. Morgan Stanley, Verizon, Apple, Microsoft, Amazon, and Honeywell 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 March, we continue to migrate into more quality equity investments at superior values. Please look at our website for the latest TOP 10 investments list.

Thanks again for your consideration & for sharing your thoughts and ideas with us.

Have a wonderful March and 2021 ahead!

Best regards,
Marlene

Marlene Oddo
Partner
PointFour Capital, LLC