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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By Ted Hart
You may have heard this old Wall Street maxim that warns against greed and impatience, but have you followed it? Without a doubt, the stock market can be an exciting place, and it’s easy to get roped into the allure of finding the next home run or timing a trade just right. For instance, a friend at a cocktail party may tell you about the killing he made off that ABC trade, and you may think, heck, why can’t I do that? Then there’s your inner trader who may get the best of you and get you thinking that you too can perfectly time your entry and exit points. If you have ever found yourself directing trades based on your emotions or you have attempted to time the market, are you really investing for the long haul? Or are you looking to make a quick buck? At Tufton, we may even suggest that you are gambling, not investing, with your retirement savings.
by Chad Meyer, CFA
Among nature’s many virtues is the simple logic of its progression. The fervor of one season will feed, with some reliability, into the fruits of the next. At Tufton Capital you would be hard-pressed to find a voice in rave review of last winter’s interminable rain and snow. But as the warm weather finally takes hold, we cannot help but look forward to the lushness of spring. There is solace in the knowledge that all those gray, rainy yesterdays will make for green afternoons in the months to come.
Of course, while nature is permitted to repeat itself—turning bloomy, gloomy, and then bloomy again with calendar precision—we expect a bit more from the market. In the first quarter of 2019, the stock market made good on last year’s choppy finish, with the S&P 500 besting a decades’ worth of quarterly growth records in one heady 14% swoop. Not to be outdone, the NASDAQ climbed nearly 17%, bringing that index (like the S&P) well above its 52-week low and well within range of its 52-week high. Needless to say, this is all welcome news. But as investors consider their next move, the questions are inescapable. Are the good times on good footing, or should one expect the market to change with the weather?
By Eric Schopf
The first quarter delivered a reversal of fortune for equity investors as the Standard & Poor’s 500 provided a total return of 13.65%. The dismal fourth quarter of 2018 is now in the rear-view mirror and almost completely out of sight. The market is just slightly below its all-time high reached in September. Fixed income investors were also rewarded this quarter when the 10-Year U.S. Treasury yield fell from 2.68% to 2.42%.
The strong gains in the securities markets followed the abrupt pivot executed by the Federal Reserve. Our concern entering 2019 was that monetary policy was too restrictive. The Fed instituted their fourth interest rate hike of 2018 in December. At the time they also signaled the possibility of two additional rate increases in 2019. Following a slew of weak economic data and the stock market selloff in December, the Fed quickly changed course. They became far more dovish and began preaching patience. The Fed clearly signaled that further interest rate increases would be put on hold. To show that they really meant business, the Fed also announced that quantitative tightening would end and that quantitative easing would return. Quantitative easing is the strategy of purchasing fixed income assets in the market place to help control interest rates. Quantitative tightening is the process of allowing those purchased securities to mature without reinvesting all of the proceeds. Maturities, net of reinvestment, were reducing the Fed’s portfolio by $30 billion per month. Portfolio shrinkage will drop to $15 billion per month in May, and all maturity proceeds will be reinvested beginning in September.
By Randy McMenamin, CFA
An informal survey asked people what is the first image they associate with the word Disney. The overwhelming response was Mickey Mouse. However, there is a lot more to Disney than the famous mouse. There is a new Disney on the horizon, brimming with major organizational changes.
Disney is a diversified worldwide entertainment company, which consists of four operating segments: Media Networks (41% of revenue), Parks and Resorts (34% of revenue), Studio Entertainment (17% of revenue), and Consumer Products & Interactive Media (8% of revenue).
