Investors did not seemingly have much to be happy about heading into the weekend following two consecutive days that the S&P was down more than 2%. In fact, Friday marked the 20th day year to date that the S&P 500 has closed up or down at least 1%. During the same period last year, there was just one such "volatile" trading day, so if you have done so already, fasten that seatbelt.
The current spell of "volatility" (for the purposes of this column defined as days that the S&P 500 closes up or down at least 1%) began on January 26; during that 40 trading day span we've experienced a volatile day exactly half of the time (20 out of 40). Half of the "volatile" days have been positive, half negative; however, the negative days have been more pronounced, and the S&P is down about 9% during that period.
In deep value land, the whims and oscillations of the broad markets don't always spoil the party. In fact, beaten-down names sometimes march to the beat of their own drummer, falling when the broad markets are rising, and vice-versa. Last week, we saw a couple of examples of this.
Down and out retailer CATO Corp (CATO) rose 6.5% between Thursday and Friday after reporting fourth quarter earnings prior to Thursday's market open. There was certainly nothing remarkable about the company's fourth quarter; same store sales were down 8%, but that's better than the seemingly monthly double digit declines of past months. The company ended the quarter with about $197 million or more than $8 per share in cash and short-term investments and no debt, and at least for now, is maintaining its lofty 9.7% dividend. For the year, CATO repurchased $38.9 million in stock. Shares currently trade at 1.87 X net current asset value (current assets minus total liabilities). You still won't find much of a consensus for CATO; just one analyst is following the name at this point.
CPI Aerostructures (CVU) also enjoyed the end of last week, rising nearly 15% between Thursday and Friday, after beating consensus earnings estimates prior to Thursday's market open. While CVU's revenues of $23.8 million narrowly missed consensus estimates (by $350K), earnings per share of 23 cents were two cents better than consensus. On Thursday, the company also announced the acquisition of Welding Metallurgy from Air Industries for $9 million in cash, a deal that the company expects to be accretive to 2018 earnings.
CVU now trades at 1.09 X net current asset value, and 1.12 X tangible book value per share. Consensus estimates put the 2019 forward price earnings ratio at 9. Time will tell if the newly signed $1.3 trillion budget deal will provide any crumbs for CVU (the $1.3 trillion spending bill will likely help balloon the national debt even higher, but we'll save that discussion for another day).
At least there were a couple of green shoots in deep value land (or value trap land, depending on your perspective) to end last week.
