Saturday, July 29, 2017

TLH Market Review & Earnings From Facebook, Altria, Procter & Gamble, MasterCard, Boston Beer, & Praxair

This post will second as my weekly TLH Market Review, and earnings recap for a busy week in our portfolio.

The Federal Reserve had a two day meeting that went pretty much as expected. Interest rates were kept in the 100-125 bps range while the Fed kept it's options open for another rate hike this year.  The market didn't completely buy it. After the meeting participants decided the next meeting with the highest probability of a rate hike switched from December 2017 to March 2018 with 47.5% odds.  That doesn't mean the market is oblivious to it happening this year. Participants are saying there is still a 46.8% chance of a hike before 2017 is in the books.

Thursday, July 27, 2017

Earnings - Wabtec, Hershey's, Paypal, Diageo, AB Inbev

The portfolio has seen a lot of companies report earnings the last few days, and I've been short on time in getting my summary out.  In total 11 of our picks will report this week.

I'll have an update tomorrow with earnings from Facebook, Procter & Gamble, MasterCard, Altria, Praxair, & Boston Beer.

I'll start with the biggest miss first.

Saturday, July 22, 2017

TLH Market Review 7/22/17

"Profits always take care of themselves but losses never do." Jesse L. Livermore

Equity markets have continued to post new highs this year. The S&P 500 has posted 3 weeks in a row of gains.  Meanwhile the Nasdaq had registered 10 days in a row of gains, with a slew of new all time highs this week. The Nasdaq continues to pace this years rally as it's up 18.7% YTD. Over the last year the Nasdaq has put in a 25.25% gain. Impressive! In fact every index is showing solid gains over the last year. That makes it easy to do well in a bull market like this. 

Friday, July 21, 2017

McCormick Buys Reckitt Benckiser Food Unit For $4.2 Billion

There was big news earlier this week when portfolio member McCormick(MKC) purchased the food division from Reckitt Benckiser, a British conglomerate. That means some very well known brands including French's mustard, and Franks Red Hot Sauce will now fall under the company umbrella.  The purchase price was not small at $4.2 billion when you factor in McCormicks total market cap is just shy of $11 billion.

Thursday, July 20, 2017

Earnings - IBM, Phillip Morris, & Visa

Here is my earnings recap for IBM(IBM), Phillip Morris(PM), and Visa(V)

IBM reported 2017 Q2 EPS of $2.48 on revenues of $19.3 billion.  Revenues continue to decline overall at Big Blue, but the company is still seeing growth in it's strategic imperatives, although that growth rate is really coming down. The company is expecting GAAP EPS for 2017 to come in at $11.95. I also don't like how the company has been benefiting from a tax benefit recently.  That would have knocked $0.18/share off EPS this quarter.  I'm also starting to become uncomfortable with the company's rising debt levels considering revenues are still falling. We aren't near danger levels, but with total debt clocking in around $45 billion it's quite a large amount overall. Shares have not fared the best since earnings as they trade lower from $153 to around $147 today

Saturday, July 15, 2017

TLH Market Review - 7/15/17

It's the summer doldrums in equity markets as volumes thin out while traders at big institutions take summer vacations.  That's normal every year across the globe.  Yet it hasn't stopped the indexes from continuing to new highs. This week we saw the Dow Jones, and S&P 500 hit new record highs, up 9.5% & 9.9% respectively. Meanwhile the Nasdaq trades just 9 points off it's record high. What's more impressive is the Nasdaq has been lapping the other indexes in terms of performance this year as it trades 17.3% in the plus column.

Thursday, July 13, 2017

Facebook At New Highs

Well Facebook(FB) has hit an all new time high today as it rallies with the market.  It's now just $27 billion shy of being worth $500 billion, or a a roughly 5% move.  I'll take a wild guess here and say the stock eclipses that mark this year.  It might not be next week, but there's still a lot of time left in 2017. 



Visit StockCharts.com to see more great charts.

Thursday, July 6, 2017

It Only Takes A Snap Of The Finger To Lose Money

It's been a just a little over 4 months since Snap Inc(SNAP) went public with much hoopla. On their first trading day shares opened at $24, and the next day hit a high of $29.44 which valued the company right around $30 billion.  Well things can change pretty quickly.


Shares are trading right around lows at $17.28 which represents a loss of 41.3% from the high. 



Visit StockCharts.com to see more great charts.

Tuesday, July 4, 2017

Portfolio Performance - First 6 Months

Well it took me a little longer to get this out than anticipated, but I found some time early this morning and later this afternoon to get this out just in time for the fireworks this evening.

The portfolio has beaten our SPY benchmark with a total return of 12.37% for the first 6 months of 2017.  The SPY has returned investors 9.23%, which is still a respectable gain.

I'm very proud to be leading our benchmark by 3.15%. I'm hoping that gain will continue. Proceeds from WhiteWave were consolidated into additional shares of each holding based on the April 12 closing price.  Since the buyout price was $56.25/share we received 10,117.12. Each holding was given additional shares worth $361.32(10,117.12/28).

Our two biggest gainers are in the payment space with PayPal(PYPL), and Global Payments(GPN) clocking in 38%, and near 34% gain. Our two biggest losers have been Boston Beer(SAM), and IBM with loses of 17%, and 1% respectively.



Equal Weight Performance With $10k Starting Balance

SharesShares After
WWAV Sale.
4/12/17 Closing
Price
12/31/2016BeginningPrice TodayEnding%GainDividendsTotal Return
BTI177.51182.8456.34$10,000.00$68.03$12,438.7924.39%$262.2027.01%
BUD94.8498.12105.44$10,000.00$110.42$10,834.228.34%$169.8510.04%
CHD226.30233.5244.19$10,000.00$52.02$12,147.6621.48%$87.3722.35%
CMI73.1775.63136.67$10,000.00$163.36$12,354.6323.55%$152.5225.07%
COST62.4664.58160.11$10,000.00$158.82$10,256.652.57%$512.467.69%
CTSH178.48184.6456.03$10,000.00$66.70$12,315.1823.15%$27.7023.43%
DEO96.2199.31103.94$10,000.00$119.14$11,832.3318.32%$113.7219.46%
EMR179.37185.5655.75$10,000.00$60.25$11,179.8111.80%$175.1713.55%
FB86.9289.51115.05$10,000.00$148.43$13,285.5832.86%$0.0032.86%
GPN144.07148.7369.41$10,000.00$90.05$13,393.4133.93%$3.3733.97%
HAIN256.21266.0939.03$10,000.00$38.34$10,201.812.02%$0.002.02%
HCP336.47346.3529.72$10,000.00$32.55$11,273.6512.74%$252.6415.26%
HSY96.68100.00103.43$10,000.00$106.64$10,663.696.64%$121.557.85%
IBB37.6838.93265.38$10,000.00$310.95$12,106.3921.06%$18.1521.25%
IBM60.2462.36165.99$10,000.00$155.58$9,702.25-2.98%$177.88-1.20%
MA97.05100.29103.04$10,000.00$120.78$12,113.1621.13%$43.4121.57%
MKC107.15110.7793.33$10,000.00$97.30$10,777.507.78%$102.428.80%
MO147.89152.8967.62$10,000.00$74.53$11,395.0713.95%$183.4815.79%
PG118.93122.9484.08$10,000.00$87.74$10,786.347.86%$164.399.51%
PM109.30112.4891.49$10,000.00$116.90$13,148.5831.49%$230.6533.79%
PX85.3388.39117.19$10,000.00$134.18$11,859.8518.60%$136.8919.97%
PYPL253.36261.8639.47$10,000.00$52.87$13,844.5738.45%$0.0038.45%
RAI178.44184.0756.04$10,000.00$64.80$11,927.8719.28%$184.8821.13%
SAM58.8861.47169.85$10,000.00$134.05$8,239.46-17.61%$0.00-17.61%
UVV158.18163.2463.22$10,000.00$64.30$10,496.224.96%$173.576.70%
V128.17132.2578.02$10,000.00$93.35$12,345.2323.45%$42.9723.88%
VGR439.75457.2222.74$10,000.00$21.17$9,679.29-3.21%$358.790.38%
WAB120.45124.9983.02$10,000.00$92.51$11,562.6515.63%$27.0415.90%
WWAV179.8610,117.1255.60$10,000.00$0.00$0.00






$290,000.00
$322,161.8411.09%$3,723.0612.37%

Benchmark Comparison







SPY44.74
223.53$10,000.00241.8$10,817.348.17%105.679.23%

Sunday, July 2, 2017

TLH Weekly Review - 7/1/17

Last week I couldn't get a weekly review out and I apologize. Either way let's catch up on this weeks latest activity. We've had some economic data, and some interesting moves in the currency markets.  We also had earnings from Hain Celestia(HAIN), and McCormick(MKC) which I'll recap in greater detail today.

We can put the first six months of the year behind us, and I'll take some time to recap the portfolio YTD in a separate article that will be published on Monday.  We had the usual economic news this week and some interesting comments from the ECB which I'll recap briefly.

Let's take a look at Durable Goods Orders.  This tracks new orders from manufacturers for things like washing machines, farm equipment, wood products, and defense equipment.  Orders dropped 1.1% in the latest report. Not something to get extremely worried about, but still not a great number.  I think in this situation we should look at the longer term chart to gain some perspective. Notice that orders have never been able to sustain levels above their pre-recession peak.  Does it make a little bit more sense now why Trump's pitch to bring back manufacturing rang so well across the country?  Manufacturing towns across America are still not feeling like the good times are back.


We also had consumer confidence numbers from the Conference Board, and the University of Michigan. The Conference board came in at 118.9 which was 1.3 points higher than the previous reading. The U of M survey came in at 95.1 which is below the final May reading of 97.1, but still encouraging to see it hover near recent highs.  We need to see consumers still showing faith in the economy. Once confidence erodes in the economy and government that's when things can go south very quickly.  So this is very good for now.

Again a lot of the economic data has still been uneven, but on the whole is OK.  That's evident in the GDP numbers which continue to show growth, albeit not blockbuster.

The markets were more volatile than normal this week.  That's because we had some interesting comments from Mario Draghi's ECB.  Draghi remarked that reflationary forces are still in play, but then conceded that current stimulus needed to stay in place. If that sounds like two different things you are correct.  Either way it sent Forex markets all over the place, but was good enough to add 2 cents to the Euro. Although this came at the expense of the US Dollar.  





Markets saw a down week with the Nasdaq leading the way with a 2.0% loss. But don't let that number fool you. Markets have shown impressive gains so far this year.

  • Nasdaq Composite +14.1% YTD
  • S&P 500 +8.2% YTD
  • Dow Jones Industrial Average +8.0% YTD
  • Russell 2000 +4.3% YTD

 A lot of the losses can be attributed to quarter end book squaring, and traders reacting to the aforementioned ECB comments.  Yes it's tough to calculate the reactions on a weekly basis, but that's why we focus on the long haul here!!!

So let's get to earnings.  We finally received an earnings report from Hain Celestial(HAIN) after they conducted their year long internal review. Remember from the outset Hain said the amount of sales was unchanged, but it was the timing they were looking into. That was good enough for me to keep faith in the company through this quiet period. I am after all a fan of the organic and better for you food category. At first the market didn't like the results. I could see why.

Sales through the first 9 months of FY 2017 showed zero growth.  Worst yet the company projected sales for the year would come in slightly below 2016's $2.9 billion with expectations of $2.84$2.86 billion for 2017. Furthermore sales in the USA fell 6% in 2017 from 2016. Not exactly what you want to see from a company in what's supposed to be a growing field.   The company did project 2018 sales to be 4-6% higher.  EPS for the latest quarter came in at $0.30, which is down quite a bit from the revised 2016 figures at $0.47

So why the lack of growth? I think that stems from increased competition.  The organic space has become way more crowded the last two years.  That was known.  I think it wasn't expected to impact Hain as much, which was a leader in the space.  But traditional food companies have expanded offerings quickly.  The company did state they planned to focus on their core brands. I think they need to focus more on their previously mentioned 20% SKU reduction, but they did just acquire Better Beans this week so clearly management shows some conflicting signals.

Well if that wasn't enough excitement this week it was then reported that Engaged Capital has amassed a 9.9% stake in Hain, and plans to nominate 7 members to the board. Based on what I just said about their SKU issue I think we can see why the company is ripe for some activism. Hain owns a lot of well known brands.  Although the hedge fund will likely push for a full blown sale, I think the company could do itself a lot of justice by becoming more focused.

Our other food company McCormick(MKC) reported Q2 EPS of $0.79 on sales up 5% to $1.11 billion.  The company updated it's guidance for the year and expects EPS to be in the range of $3.94-$4.02 compared to EPS of $3.69 in 2016.  The market has punished shares after the announcement.  Frankly I'm not sure why.  It's just business as usual at McCormick. Shared did perk up a bit Friday, but have not erased all of their post earnings loss.  In a few years we'll look back and laugh that people sold shares in this fabulous company.  Here are the CEO's remarks:

Lawrence E. Kurzius, Chairman, President and CEO, stated, "Our strong second quarter financial results reflect the effectiveness of our sales and profit growth strategies driven by the engagement of our employees around the world. Both our consumer and industrial segments contributed to our constant currency sales growth of 7%. Our consumer segment delivered base and new product sales growth from the year ago period, with solid performance in the Americas and strong momentum in China, partially offset by the impact of challenging environments in Europe, Middle East and Africa (EMEA). Our industrial business delivered excellent sales growth driven by new products, expanded distribution, and customer intimacy. In addition to our strong base business and new product growth, the acquisitions of Giotti and Gourmet Garden contributed to higher sales as valuable additions to our global portfolio of flavors. Through the second quarter, we have grown sales 6% in constant currency within our 2017 constant currency sales growth objective of 5 to 7%.


As a reminder I'll release the portfolios YTD results Monday. Will we beat the S&P 500?  I sure hope so. Everyone enjoy  Independence Day on Tuesday! Be safe and please practice safety around fireworks.  There will not be a weekly review next weekend since action during holiday weeks is usually uneventful.  If anything noteworthy happens I'll post on the blog or twitter.