Weekly Performance Review 12/21-12/24

There was no so-called Santa Claus rally over the holiday-shortened trading week as the major stock indexes posted mixed results heading into the closing days of 2020.  Investors weighed lawmakers’ approval of a long-awaited relief bill against ongoing virus concerns and new U.K. travel bans.  

Small cap and technology stocks were up, with both the Russell 2000 and Nasdaq indexes finishing the week higher.  

The U.S. has continued its vaccination effort, with over 1 million people receiving the first does of the new vaccine.  Consumer confidence has seen a short-term dip, and weekly jobless claims rose unexpectedly, pointing to continued strain from economic restrictions across the country.

Stocks have largely been stationary over the first four weeks of December, in contrast with November, when the S&P 500 gained nearly 11% and surged to a record high.  This week the S&P 500 finished 0.51% lower.  The Dow finished the week down 0.35%.  The Nasdaq  was little changed for the week, ending the week 0.003% lower.  

Continue reading  to find out how our trades did this week.   

12-21-2020–TJX up 0.84%

TJX is best in its class on product, merchant, merchandising, discipline with inventory and they’re great at marketing.  But the real kicker is — gross margins have opportunity to go a lot higher.  In 2008, during the financial crisis the following year TJX’s gross margin went up 300 fold.  Currently, the stock is only up 11% for the year.

Overall, the stock has an aggregate VGM Score of B.  If you aren’t focused on one strategy, this score is the one you should be focused on.  

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising.  It comes with little surprise TJX has a consensus rating of Strong Buy.  Of 18 analysts recommendations, there are 14 Strong Buy ratings, 1 Buy rating, 3 Holds and no Sell ratings for TJX stock.  It also holds a Zacks Rank #2 (Buy).  We expect an above average return from the stock in the next few months.  

12-21-2020–SIRI up 0.88%

Sirius XM (SIRI) is the primary asset of 74% ownership by Liberty Sirius XM (LSXMK).  These investments are controlled by legendary media investor John Malone.  Investors who have followed Malone in and out of media stocks over the past 25 years can attest to the solid returns.  

Liberty Sirius XM’s ownership in SIRI has risen steadily in recent years.  When it crosses 80%, which at the current rate might be in early 2022, Malone may provide investors with a profitable exit, a pattern he has followed in the past.  

12-21-2020–LSXMK up 1.18%

LSXMK trades at a 17% discount to the value of its holdings in Sirius XM.  If these discounts were eliminated, perhaps in two years, we could see a stock, which closed at $42.32, worth $63.  If past is prologue, it should be worth waiting for.  

12-21-2020–NLOK up 0.62%

NortonLifeLock, under a new management team, delivered a greatly improved financial performance during the first half of fiscal 2021, which ends in April.  Billings improved 7% during the September quarter, operating margins gained 200 basis points and EPS grew 100%.  Growth came from a new product for PC gamers, all-in-one family plans and online privacy monitoring services.  

It’s also one of the best value stocks in the tech sector, trading at a forward P/E of 16, that’s roughly half of its IT peers.  That’s also a 25% discount to the stock’s own historic forward-looking multiple.   

12-21-2020–LYB up 2.38%

Chemicals companies are cyclical in nature, as are refineries.  They tend to do well when the economy is humming.  So, it’s not surprising that LyondellBasell got beaten up in March.  But what is surprising is the sheer magnitude of the fall.  Before the dust settled, the stock had fallen by about two thirds from its 52-week highs.  

The shares bottomed out in late March and by early December had clawed back most of their losses for the year.  

But here’s the thing.  LYB shares were cheap before the March selloff, and they remain cheap today.  The stock trades 1.1 times sales and 13 times expected 2021 earnings.  To put that into perspective, the S&P trades at an almost shocking 2.7 times sales and 22 times expected 2021 earnings.  

As we finish up 2020, value stocks appear to be assuming leadership from growth stocks.  We’ll see if this is a blip or if it represents a sustained shift in sentiment.  But regardless, LYB is a cheap stock showing strong momentum, and that puts it on strong footing to one of 2021’s top value stocks.   

12-22-2020–COST down 0.037%

COST has tremendously reliable cash flow when compared with other retailers.  Consider that with some 58 million paid memberships at roughly $60 per pop in annual dues.  It also enjoys a robust $3.5 billion in annual sales rolling in simply from renewals.  

It should be no surprise that Costco has not just weathered the pandemic, but thrived amid it.  Since the wholesaler provides staples and groceries it has seen the same uptrend as other stores in this category — but as it also sells items like flat-screen TVs and propane grills that have been in high demand amid the stay-at-home trend.  As a result, COST stock has surged 25% this year compared with 13% for the S&P 500 in the same period.  

Looking to fiscal 2021, the company expects revenues to grow by a little under 10%, and earnings to expand by low double digits.  That means these gains are part of a sustained uptrend.  

12-23-2020–LLNW down 1.43%

William Blair analyst Jim Breen noted that Limelight expanded its capacity ahead of new demand thanks to over-the-top offerings such as Comcast’s (CMCSA) Peacock and        AT&T’s (T) HBO Max and should also benefit from the rise in demand due to 5G devices. 

“We expect that the company will expand margins beyond 2020, as OTT video services accelerate top-line growth,” he writes.  “We believe that Limelight’s stock is attractively valued, trading at a discount to its peers on an enterprise-value-to-sales basis and relative to the growth opportunity ahead of the company.”

Limelight holds a unique position in the CDN market, combining decades of experience with a collection of growth-boosting features such as edge computing services.  The stock is priced for absolute disaster, while the business is firing on all cylinders.  This could be the buying window you’ve been looking for. 

12-24-2020–SIRI up 0.64%

SIRI has recovered a bit as auto sales have returned to pre-pandemic levels, and 78% of new car sales are enabled to receive Sirius XM.  Additionally, the percentage of used cars sold with Sirius XM subscriptions continues to rise, and currently represent 50%.

Of 13 analyst ratings, 10 rate the stock a Strong Buy, along with one Buy, one Hold and one Strong Sell rating, giving SIRI stock a consensus rating of Strong Buy.


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