The 4th quarter of 2020 was a record advance for stocks with the broad market up over 14%. Our stocks substantially outperformed and were up approximately 21%. These gains have continued into January and we have seen a further 6% advance in Winslow stocks (versus 2% for the market). Indeed, in our last quarterly letter we mentioned seeing “signs of broadening out of market strength to include value and small-cap stocks”. That prediction has come true. Small-cap stocks alone were up 31% in the quarter.
Congress has finally agreed upon an interim stimulus package and President-elect Biden is proposing substantial fiscal policy stimulus. The rollout of Covid vaccines has justified optimism about significant economic recovery this year. While inflation will be a worry down the road, the earnings outlook is extremely favorable and improved market breadth is a meaningful positive. Finally, Aerojet Rocketdyne which has been a core holding of our clients for several years is being acquired by Lockheed Martin at a 30% premium.