Sutton Place Capital Management LLC
New York, New York
April 9, 2021
S&P 500: 4,104.75
Ten Year note: 1.63%
Crude Oil: $63.20
Newness, newness, newness
The U.S. government authorized another tremendous stimulus package,
expanded spending programs, and broadened the eligibility for the COVID-19 vaccine.
This all fuels an optimistic outlook for people getting back to work and for providing an
economic rebound. The SPCM composite had its third best performance for the first
quarter outperforming the benchmark in 12 years. Over the last 12 months the world
has changed beyond recognition. But now we are planning, reinforced by U.S. GDP
annual estimates for growth of 6-8% for the current year. The fiscal support and SPCM
track record, in my opinion, suggests investing more money into the stock market. The
current situation is very good, oil is holding at $60 which is high but not as high for the
last 3 years, and the long-term bond yields are starting to rise as the Federal Reserve
suggested but the 10-year Treasury note at 1.63% has retreated from a high of 1.75%.
Overseas exports are also improving.
For the first quarter, traditional cyclical sectors, Energy and Financials,
continued to be the top performing sectors. And some traditionally high P/E holdings
and alpha contributors underperformed, such as ServiceNow, probably as institutional
money managers likely booked profits. The technology sector has been a stalwart
contributor to the SPCM composites performance. Given the growth in the holdings
since SPCM was founded in 2009, some equity holdings with more Price than Earnings
have been eliminated, such as Splunk. The dip in tech names allowed me to fill-in
holdings. For the first quarter, two names were added. US Bancorp/USB based in
Minneapolis, Minnesota, is one of the largest commercial banks operating
predominantly in the U.S. The purchase allows for SPCMs financial holdings to be
overweight versus the benchmarks financial allocation. The second holding is Zoetis
Inc/ZTS, the largest global animal health company. There has been a lot of talk about
reopening trades but they are just that, trades. Investing is not trading, but investing in
a company such as ZTS which kept part of its business going during the pandemic and
now has another engine to kick-in during the reopening, is investing. The top equity
contributors were CVS Health Corp, EOG Resources and Delta Airlines. For a variety of
reasons (price target attained, tactical trade and capital recuperation), these names were
sold during the first quarter. The laggards included Barrick Gold Corporation,
Docusign, and Alexandria REIT, all names that remain integral positions for clients.
At the time of this writing, the P/E multiple on forward S&P earnings of $175.54
for 2021 is 23.3 times. According to FactSet, the estimated earnings growth rate for S&P
500 is 24.5% year over year (YoY), and earnings growth rate estimates have increased
substantially since December 31 st , 2020 (15.8%). One sector that may be increased is
consumer discretionary given the massive fiscal support. The stock market has had a
marvelous run since 2008 and the next step may be to put some of the monies in cash.
Should the interest rates increase as expected and balance sheets improve as work flow
rebounds; opportunities may arise to layer in bond holdings with a respectable yield.
Chief Investment Officer
Information and opinions presented in this email are provided for informational purposes only and are not to be used
or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. Sutton Place
Capital Moment (SPCM) has not taken any steps to ensure that the advice referred to in this report are suitable for
you and it is recommended that you consult an accountant if you are in doubt about any such advice. Information and
opinions presented in this report have been obtained or derived from sources believed by SPCM to be reliable, but
SPCM makes no representation as to their accuracy, timeliness or completeness. SPCM accepts no liability for loss
arising from the use of the information presented in this report. Past performance should not be taken as an
indication or guarantee of future performance.