More so than ever before, the times in which we now live call for clarity of thought. As this letter “goes to press,” government officials are tasked with frankly weighing public health against economic strength; business leaders are struggling to responsibly balance the wellbeing of their employees with the newly-heightened challenges of remaining a going concern; and families the world over are called to remember, and to rally around, that which they truly hold dear. With the forces of history so plainly at work, there is scant use for distraction or spin.
By Eric Schopf
The first quarter will be long remembered as the coronavirus of 2019 that developed into a full-blown pandemic. Measures to slow the virus’s spread have thrown the economy into recession and securities markets into collapse. Fear has replaced greed and investors headed for the exits. On February 20th, the Standard & Poor’s 500 was up 4.7% for the year and stood at an all-time high. The stock market needed just 22 trading days to shed 33.5%, and seven of those 22 trading days resulted in losses in excess of 4%. The single worst day was March 16th when the stock market fell 12%. The 325-point drop in the S&P 500 is the single largest point decline and the third largest percentage decline in the history of the index. For the quarter, the loss was a more modest 19.6% due to a rally into the end of the quarter.
By Ted Hart
NXP Semiconductors NV (NXPI) is a semiconductor company based in the Netherlands. It operates in the business of producing High-Performance Mixed Signals (HPMS) in four distinct lines. These lines include Automotive, Industrial & Internet of Things and Mobile and Communication Infrastructure. The company holds market leading positions within each of these business lines, and despite softer sales guidance due to the coronavirus, future growth for their products is still expected to outpace their respective markets. During the 1950s until 2006, the company was the semiconductor segment of Philips before it was sold to a private equity group. Though the spread of the coronavirus may temporarily slow growth, we believe there is a buying opportunity while we wait for sales to rebound. Recently, we have initiated positions in NXPI with the intention of achieving a full size position of 2% of equities.
By Barbara Rishel
“May you live in interesting times” is an English expression often mistakenly associated with the Chinese philosopher Confucius that seems truly appropriate in today’s world. We are all overwhelmed by the deluge of negative news headlines about the impacts of the COVID-19 pandemic and the changes to our daily routines and lifestyles. We wonder if these changes are just temporary adjustments, or will they become a permanent and integral part of our lives? What are the impacts on the financial markets, and specifically, on our portfolios?
by Chad Meyer, CFA
By the age of twenty-five, some people have already changed or influenced our world. Charles Lindbergh, age 25, completed the world’s first solo transatlantic flight, pushing modern aviation forward in one 3,600-mile swoop. At age 24, Orson Welles wrote the script for Citizen Kane, widely considered a crown jewel of twentieth century cinema. During the Hundred Years’ War, Joan of Arc led the beleaguered French army to a momentous victory over the English at Orléans. She was just 16 years old. Alexander Hamilton, dead set on making a name for himself in our young republic, led a battalion to victory over the British at Yorktown. He was only 25 years old, when five days later the British surrendered.
By Eric Schopf
The stock market delivered a dazzling performance in the fourth quarter. The Standard and Poor’s 500 returned 9.07% and finished the year with a total return of 31.49%. The 10-Year U.S. Treasury yield closed the year at 1.92%. Although the rate had moved up from 1.68% at the beginning of the quarter, it is significantly below the 2.68% level where it started the year. Last year was a big departure from 2018. One year ago, I wrote that the Standard and Poor’s 500 turned in the worst fourth quarter performance since the depths of the financial crisis in 2008, and that the fourth quarter total return of -13.52% wiped out all performance gains for the year, which settled at -4.38%. What a difference a year makes!
By Scott Murphy
Tufton Capital has been shareholders of VF Corporation (Ticker: VFC) for years, and we last featured the company and its stock in our Winter of 2016 quarterly newsletter. Since Tufton started investing in VFC in 2016, the stock has been a great performer because company management has been able to successfully address many of the “temporary” issues the company faced at the time. Good companies (and their stock prices) are always susceptible to short-term pullbacks when the news flow turns negative or when a short-term operational issue affects the revenue and earnings picture. In the summer of 2019, an inverting yield curve, fear of a weakening consumer and the prospects of a recession were enough to push shares of VFC down approximately 15%. This instance of negative market news afforded us the opportunity to add to our existing positions and establish holdings in newer accounts. With the benefit of hindsight, our timing was good, and the stock has reversed its decline and currently trades near all-time highs as we move into 2020.
By Rick Rubin, CFA
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law by President Trump on December 20, 2019. The legislation is designed to allow more individuals to access workplace retirement plans and to increase retirement savings. It will impact defined contribution plans, defined benefit plans, individual retirement accounts (IRAs), and 529 plans. Many of the provisions became effective on January 1, 2020.
by Chad Meyer, CFA
“May you live in interesting times.” Purportedly Chinese in origin, this cryptic maxim has been alternately interpreted as both a blessing and a curse. In that regard, it should strike a familiar note with American investors. As this newsletter goes to press, the country’s major news outlets are allocating equal front-page real estate to impeachment proceedings against a sitting president, to campaign efforts for the next one and to a foreign policy landscape with uncertainty spanning from Great Britain to Turkey. Blessing or curse, there is no denying these “interesting times.”
By Eric Schopf
The third quarter provided positive returns for both stock and bond investors. The Standard and Poor’s 500 delivered a 1.7% total return, and the index reached an all-time high of 3025 on July 30. The index closed the quarter at 2977, just 1.6% below its record level. The 10-year U.S. Treasury yield fell from 2.00% on June 30 to 1.68% at the quarter’s end. Intra-quarter, the 10-year yield Treasury touched a low of 1.46% on September 3.
A 401k plan for a company’s employees should be a rewarding benefit to the business owners as well as to the participants. Many owners, or plan sponsors, continue to hire outside advisors who are not fiduciaries to oversee their plans. By hiring non-fiduciaries, such as investment brokers or insurance agents, fiduciary duties are not being upheld.
By Ted Hart
Many investors may remember the mid to late 1990s when Microsoft (MSFT) first started firing on all cylinders. Founder and then CEO Bill Gates and President Steve Ballmer were dancing on stage to the Rolling Stones’ song “Start Me Up” before introducing Windows 95. Consumers lined the sidewalks outside of computer stores eagerly awaiting the release of the new operating system as if it were a new iPhone. Today, Microsoft investors are reliving those glory days, but it is not without a decade and a half of pain and heartache. (more…)
by Chad Meyer, CFA
The case for American Independence, as it was argued some two hundred and fifty years ago, comprises scenes familiar to any schoolchild—British troops in the streets, tea in the harbor, and a felt need for self-government. But writing to a friend in 1816, Thomas Jefferson identified a less obvious threat to his young country—one that he viewed as more dangerous than the Red Coats. “I sincerely believe,” he admitted from his Monticello desk, “…that banking establishments are more dangerous than standing armies.” Although July 4th has come and gone, American investors can be forgiven for keeping that particular founding concern at the front of their minds all summer long.
By Eric Schopf
Stock market strength continued in the second quarter with the Standard & Poor’s 500 delivering a total return of 3.11%. The bond market was even stronger as interest rates fell across the yield curve. The yield on the 10-Year U.S. Treasury fell from 2.42% to 2.00%. The increase in 10-Year Treasury bond prices corresponds with a total return of over 4.0% in the quarter. Although the numbers look solid in retrospect, the quarter was filled with drama. The stock market climbed over 4.0% in the month of April, only to fall 6.6% in May. The market rallied once again and advanced 7.3% in June.
By Rick Rubin, CFA
Eleuthère Irénée du Pont de Nemours (E. I. du Pont) was a chemist born in Paris in 1771. From a young age, du Pont was interested in explosives. In 1802, he founded DuPont de Nemours (legacy DuPont) in Wilmington, Delaware to manufacture high quality gunpowder. The company expanded rapidly and became a key specialty chemicals producer. Their research efforts led to the development of nylon, Lycra/spandex, Tyvek and Kevlar. In 2015, DuPont completed the spin-off of its Performance Chemicals division as a public company named Chemours. Chemours assumed certain liabilities from DuPont including litigation related to the Teflon product.
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