“We simply attempt to be fearful when others are greedy and to be greedy when others are fearful”
- Warren Buffet
Happy Monday,
Overall, the S&P, Dow, and Nasdaq were all up in April following a solid March. The S&P was up 5.2%, the Dow increased 2.7% and the Nasdaq accelerated 5.4%.
In our view, the markets continue to be driven mainly by the Covid-19 recovery timetable, Covid recovery government support, and the unyielding support of the Federal Reserve. There continues to be a generally optimistic feeling regarding the vaccine rollout, but the uncertainty of timing and a possibility that variant strains of the virus will push our recovery backward is producing a lumpy performance. In addition, tax reform is also adding to that uncertainty. It would not surprise us if the market remained a bit uncertain, with small pull-backs becoming a regular event in the rest of Q2 ‘21.
That said, April was a very good month. Our public equities portfolio is up 7.7% YTD on an annualized basis and up 27.4% on a 1-year basis. The trend that emerged last month, which was the resurgence of the Dow, was replaced this month by earnings-related gains in many Nasdaq stocks. In our view, growth is no longer the “name of the game” and we believe that value stocks will lead the market up higher.
The S&P went up 5.2% to 4,181 in April, 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 accelerated 2.7% to 33,879 in April, as the markets continued the rotation into lower PE, value investments, especially industrial and consumer staples.
Nasdaq increased 5.4% to 13,962 in April, as Tech stocks roared back based on growth and earnings improvements.
In April, Covid-19 infections, hospitalizations, and deaths in the U.S. all trended dramatically lower as vaccinations have ramped up quickly. Investors have also shrugged off any of the negative aspects of how we will pay for the $1.9T Recovery Plan and the $2T Infrastructure Plan that have been proposed by the Biden Administration.
Additionally, M&A transaction volume continued strongly, and the Fed continued its unprecedented support of the economy. The Housing sector also continued to be a bright spot with strong consumer demand thanks to low interest rates.
In May, we believe the public markets will continue the rotation to lower PE, value, and industrial stocks and that overall returns will be positive, but mixed. We reduced the cash/bond portion of our public equities portfolio to 6.5% in April, but expect to increase that allocation in May to ~20%. We continue to believe that value stocks represent the best buying opportunity during the rest of Q2 ‘21.
We 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, Cat, Honeywell, Verizon, T-Mobile, Apple, Microsoft, Amazon, Alphabet, Home Depot, United Health Care and Visa all continue to be top selections as we view them as stronger and more nimble competitors in their respective sectors. Please visit our website to view our latest TOP 10 investments.
Thanks again for your consideration & for sharing your thoughts and ideas with us. Have a wonderful May and 2021 ahead!
Best regards,
Marlene
Marlene Oddo
Partner
PointFour Capital, LLC