Last Week:

The stock market version of musical chairs continued, as investors scrambled from Financials, Industrials, and Utilities, into Health Care and Technology shares. The market itself didn’t move much, with the S&P 500 inching up 0.21% and the Russell 2000 gaining 0.57%. Energy stocks were the worst performers, as crude oil sank another 3.9% to its lowest level of the year. The yield on the Ten-Year Treasury slipped one basis point to 2.14%, also at its year low. All the biggest banks in the U.S. were deemed healthy by the Fed’s stress test, leading to hopes that increased dividends and lending may be forthcoming.

This Week:

The economic calendar includes May readings on Durable Goods, Personal Income, and Consumption, as well as June Consumer Confidence all scheduled for release. Expectations are for the readings to show a modestly slowing economy. It is also anticipated that the latest version of health care reform will fail to muster up enough support to pass, which could (once again) lead to a pivot to the more popular topic of tax reform.

Stocks in the News:

American Software, Inc. (AMSWA): Total revenues for the quarter ended April 30, 2017 were $26.3 million, a decrease of 9% over the comparable period last year. Adjusted net earnings for the quarter ended April 30, 2017, which excludes non-cash stock-based compensation expense, amortization of acquisition-related intangibles, a discrete tax adjustment and the proceeds from the sale of real estate were $2.7 million or $0.09 per fully diluted share compared to $3.3 million or $0.11 per fully diluted share for the same period last year. The overall financial condition of the Company remains strong, with cash and investments of approximately $89.8 million and no debt as of April 30, 2017. During fiscal year 2017, the overall cash and investments balance increased by $11.9 million when compared to April 30, 2016 and the Company paid approximately $12.5 million in shareholder dividends.

Barnes & Noble. Inc. (BKS): Fiscal 2017 consolidated net earnings from continuing operations were $22.0 million, or $0.30 per share, compared to net earnings from continuing operations of $14.7 million, or $0.05 per share, in the prior year. For the full year, Retail generated operating income of $90.7 million, while NOOK incurred an operating loss of $36.4 million, for a total operating income of $54.3 million. In addition to exceeding prior year operating results, excluding non-recurring charges in both years, consolidated EBITDA was $187.2 million in fiscal 2017, in-line with guidance of $180 million to $190 million, versus $185.7 million last year.

Lee Enterprises, Inc. (LEE): Announced an agreement to purchase the assets of the Dispatch-Argus, including QCOnline.com and related publications serving Moline, Rock Island and dozens of other communities in western Illinois. The purchase price is $7.15 million, including an adjustment for working capital. The sale is expected to close later this month. Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, with daily newspapers, rapidly growing digital products and nearly 300 weekly and specialty publications serving 49 markets in 21 states. 

New Media Investment Group Inc. (NEWM): Announced that the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s common stock over the next 12 months. “We believe our current stock price is at a significant discount to the intrinsic value of our company. We continue to firmly believe in our cash flows that support the dividend, our growth prospects, including our acquisition pipeline, and our long-term strategy,” New Media Chief Executive Officer Michael E. Reed said. “This stock repurchase program announced today demonstrates our confidence in the strength of our business and commitment to delivering value to our shareholders.” New Media supports small to mid-size communities by providing locally-focused print and digital content to its consumers and premier marketing and technology solutions for our small and medium businesses partners. The Company is one of the largest publishers of locally based print and online media in the United States as measured by our 130 daily publications.

Tagged: , , , , , , , , , , , , , , , , , , , , , .

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

Last Week:

This Federal Reserve leadership is maintaining consistency with its comments on the long-term outlook for normalization of interest rates; despite slightly softer than expected economic data recently. On the one hand, the short-term data has been uninspiring, but on the other hand, the equity markets historically have appreciated a steady hand at the Fed. Despite mounting evidence that the economy is cooling off, the Federal Reserve hiked short-term rates by 25 basis points to a range of 1% to 1.25%. The yield on the Ten-Year Treasury fell 4 basis points to 2.16%. The flattening of the yield curve is usually a warning sign of an impending slowdown or recession. The consumer price index, retail sales, and consumer confidence for May, all came in at modestly lower than expected readings. Prices for crude oil hit a seven-month low, on news of high oil inventories. The Dollar continued to drift lower versus the other currencies, and has now lost 6% in value this year. The Dow Jones Industrial Average set a new high during the week, while the S&P 500 broke even and the Russell 2000 declined 1.05%.

This Week:

The Regional Fed Presidents will be on the speaking circuit, discussing the economy and providing insights into the monetary strategy going forward. May Home Sales and Leading Indicators will be released later in the week.

Stocks in the News:

Perhaps the biggest news of the week was the announcement that Amazon.com had agreed to purchase Whole Foods Market, Inc. (WFM) for $13.7 billion. The proposed deal sent shares of pretty much every other supermarket or food company into a nosedive. It also sparked some very funny jokes, such as “Amazon just bought Whole Foods for $13.7 billion or a week’s worth of their prepared salads.”

Lakeland Industries, Inc. (LAKE): Net sales increased to $23.0 million for the three months ended April 30, 2017 compared to $20.4 million for the three months ended April 30, 2016, an increase of 12.7%, while net income increased to $1.7 million from nominal net income of $3,000 in the year earlier period. Lakeland manufactures and sells a comprehensive line of safety garments and accessories for the industrial protective clothing market.

Crown Crafts, Inc. (CRWS): Net income for the fourth quarter of fiscal 2017 was $1.6 million, or $0.16 per diluted share, on net sales of $17.3 million, compared with net income of $2.2 million, or $0.22 per diluted share, on net sales of $25.1 million for the fourth quarter of fiscal 2016. Crown Crafts, Inc. designs, markets and distributes infant, toddler and juvenile consumer products, including crib and toddler bedding; blankets; nursery accessories; room décor; burp cloths; bathing accessories; reusable and disposable bibs; and disposable placemats, floor mats, toilet seat covers and changing mats.

Motorcar Parts of America, Inc. (MPAA): Net sales for the fiscal 2017 fourth quarter increased 17.4 percent to $114.4 million from $97.4 million for the same period a year earlier. The company’s sales performance for the fiscal 2017 fourth quarter reflects continued strength of its rotating electrical business, as well as contributions from its other product lines — including the company’s emerging brake power boosters, which began shipping in August. Net income for the fiscal 2017 fourth quarter increased sharply to $9.8 million, or $0.50 per diluted share, from $2.3 million, or $0.12 per share, a year ago.

Ecology and Environment, Inc. (EEI): Quarterly earnings improved by 50% to net income of $0.06 per share for the third quarter of fiscal year 2017 from net income of $0.04 per share for the third quarter of the prior year, as lower operating expenses more than offset lower revenues. During the most recent quarter, the Company also recorded a net $0.6 million non-recurring legal and consulting expense associated with a contested election of directors that was settled amicably prior to the Company’s Annual Meeting of Shareholders held in April 2017. E & E is a global network of innovators and problem solvers, dedicated professionals and industry leaders in scientific, engineering, and planning disciplines working collaboratively with clients to develop technically sound, science-based solutions to the leading environmental challenges of our time.

Tagged: , , , , , , , , , , , , , , , , , , , , , , , .

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

Rotate

Published on June 12, 2017

Last Week:

Two things strike me as significant about the market’s recent action. First, the Comey drama isn’t affecting stock prices. Second, investors still see no alternative to equities. Despite compelling testimony on Thursday that the POTUS attempted to influence the course of the investigation into Russian interference with the election, and a severe sell-off on Friday in the stocks that have accounted for over half of all the gains this year in the market, the S&P 500 essentially broke even while the Russell 2000 gained 1.16%. Traders rotated out of the high-flying technology stocks immediately into financials and energy companies, rather than reducing equity exposure. The yield on the Ten-Year Treasury ticked up 4 basis points to 2.2%, a level which clearly still isn’t compelling investors to reassess their exposure to equities.

Being “value investors”, we find the run-up in the so-called “FANG” stocks more curious than their sell-off on Friday. Clearly neither their actual results, nor their forecasts warranted the price action as this chart illustrates:

This Week:

The FOMC meeting on Wednesday will be the primary focus of investors, with a ¼ point rate increase a near certainty. The central bank will release updated economic projections, and Fed Chairwoman Janet Yellen will speak at a press conference following the meeting. The communications will be watched for any details on the Fed’s planned timing for shrinking its $4.5 trillion holdings of bonds and other assets. There could also be some positive news out of Washington about tax reform and relaxed regulations on banks.

Stocks in the News:

Orion Energy Systems Inc. (OESX): Michael W. Altschaefl, newly appointed Chairman &CEO, discussed the Company’s path to profitability. “We decided that our cost reduction efforts needed to be top to bottom. As part of our cost reduction plan, Orion’s executive team and outside directors have reduced their total compensation by approximately 35% compared to fiscal 2017 levels. We believe that in starting our cost initiatives at the top, we have sent a very clear message to all of our stakeholders regarding our commitment to managing costs and driving the business to profitability.

In total, we expect to reduce operating expense levels by $3.5 million to $4 million on an annualized basis or approximately 12% to 13% versus fiscal 2017. We expect to have majority of our cost reduction activities completed by the end of June and the balance by the end of September 2017. As part of these initiatives, we expect to record nonrecurring charges totaling $1.5 million to $2 million relating to our cost-cutting initiatives, principally in Q1 and Q2 of fiscal 2018.

Now I would like to take a few minutes to talk about our growth strategy. Continued execution of our agent strategy, which includes active efforts in supporting agents in getting up to speed on our products and providing industry-leading levels of service and responsiveness from initial quote through product shipment and after-sales support, should position Orion to achieve our revenue growth goal of 10% to 15% in fiscal 2018.”

NTN Buzztime, Inc. (NTN): Signed a strategic licensing agreement with Scientific Games to deliver Buzztime trivia as part of Scientific Games’ Elite Bonusing Suite (“EBS”) offered to casino operators around the world. Scientific Games’ Tom Doyle, VP product management, said, “Casinos want to increase player duration, create engaging experiences, and increase loyalty. Buzztime has achieved these goals for over 30 years at bars and restaurants, where the dynamics are similar to those at casinos. We think introducing fun bonusing games like Buzztime in our Elite Bonusing Suite will be an exciting new way for casinos to attract and engage players, especially during slot tournaments.” Ram Krishnan, NTN Buzztime Chief Executive Officer, said, “Scientific Games is a leader in gaming technology and loyalty program innovation. We have goals that are well aligned, and we are proud to have been selected as Scientific Games’ partner to deliver this one-of-a-kind gaming experience. This agreement exemplifies our strategy to leverage our existing game investments into new revenue streams. Our software – standalone or integrated into our customizable handheld tablet – is highly scalable.”

 

Tagged: , , , , , , , , , , , , , , , , , , , .

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.