Negative Economic Reports

Equities Moved lower last week on negative economic reports and Federal Reserve Chairman Jerome Powell stating additional stimulus could be needed. The cautionary tone from the Fed Chairman and weak retail sales, which fell 16.4%, led to a 2.3% drop for the S&P 500^® Index. Real estate was the worst-performing sector as many tenants have skipped payments, especially in the retail strip centers and traditional malls. In addition, the more economically sensitive sectors fell as continued lockdows have a larger impact on profits.

Southwest Airlines Co., Delta Air Lines, Inc. and American Airlines Group Inc. all fell by over 10% for the week after travel authorities projected air traffic will not return to 2019 levels until 2023. By contrast, Cisco Systems, Inc., one of the final technology firms to report, beat expectations as work-from-home equipment and security sales buoyed the tech giant. With more than 90% of firms reporting earnings, the S&P 500 is projected to see a 16.6% drop in earnings per share in the first quarter, led by a 64.2% drop from the consumer discretionary sector. This week, The Home Depot, Inc., Target Corporation and Walmart Inc. are set to report results, amongst other retailers. Traders will continue to monitor the path of the virus and reopening plans across the country as lockdowns ease.

The S&P 500 Index was down 2.3% for the week. Its top-performing sectors were Health Care (0.9%) and Consumer Discretionary (-1.0%), while the bottom-performing sectors were Real Estate (-7.3%) and Energy (-7.6%). In the fixed-income market, the 10-year Treasury yield was down, ending at 0.6%.

We continue to seek companies that reflect our Change-Based^SM investment approach.

Change Based Investment

V.F. Corporation designs, produces, procures, markets and distributes branded lifestyle apparel, footwear and related products worldwide. It operates in the following segments: Outdoor & Action Sports, Imagewear and Sportswear. The company has more than 30 brands, including The North Face, Vans, Red Kap, Williamson Dickie and Timberland. The company was founded in 1899 and is based in Greensboro, North Carolina.

V.F. Corporation has a proven track record of successful mergers and acquisitions in footwear and apparel. The company has consistently purchased brands at reasonable prices, increased their profitability, and in some cases, it has grown those brands for decades. After several years of declining sales, V.F. is selectively repositioning its brands, with the biggest change – a spin-off of Wrangler and Lee into a separately traded company, Kontoor Brands. Over the long-term this change should result in higher growth and provide additional flexibility for V.F. to pursue more profitable acquisitions. In the near-term, V.F.’s operations are being negatively affected by COVID-19. We believe that, as the world comes out of the coronavirus epidemic, V.F. is well-positioned for long-term growth.

Top 5 Equity Holdings

Large Cap Growth