Additions
- CVS HEALTH – CVS: Stock experienced weakness in June, and position was added to the portfolio. CVS continues to be one of the largest PBM organizations in the US.
- FOX – FOXA: Market continues to value Fox very conservative despite wide moat comprised of high quality content generation and distribution assets globally. Sky acquisition proceeds are planned. Stock analysis is featured in the section below.
- GE – GE: With the CEO change and ongoing traction in industrial segment, we believe that GE remains undervalued. GE’s wide moat is based on the value of the installed equipment base and recurring nature of after-market services.
- WELLS FARGO – WFC: Wells hovers in low $50 territory which allowed us to add to the position at attractive prices. Normalized interest environment and low cost stable deposit base will eventually unlock Well’s underlying earning power. Stock analysis is featured in the section below.
Reductions
None
%
12mth Performance
Portfolio Performance
Underlying companies’ earnings remain robust with no major surprises in Q1 earnings cycle. Google, Apple and Microsoft continued to rapidly grow earnings and stocks are correspondingly tracking the underlying earnings trends. IBM is lagging with another disappointing quarter, we’re not sellers at this price though. We remain optimistic on large cap IT as this sector of the economic is gaining share and the incumbents are widening the moat around their core services and products with the help of machine learning and access to large data sets.
Healthcare stocks remain a good value, in our opinion, with high margins, improving R&D productivity and continued opportunity for innovation. We have no views on the likely effects of the healthcare reforms, other than that there will always remain a scope for innovation that patients and payers are happy to pay for.
Financials continue to perform well and in line with underlying economic trends. Credit quality remains stable whilst low interest environment is causing interest income to lag. Normalized interest environment will support financial’s earnings, however we can predict neither the likelihood or nor timing of such event.
Our portfolio philosophy centers on holding wide moat companies, purchased at reasonable prices and held for long-term with low portfolio turnover. Investors rarely benefit from rapid buying and selling of securities and inaction is often the most rational course of action. After buying security at reasonable prices, long-term security holders will get fair share of wealth created by the underlying companies, which in the case of US select portfolio we believe will be satisfatory.
For investors looking to replicate the US selection portfolio, we recommend to only add/initiate positions highlighted in Green and wait for other holdings to become available at more attractive prices. Holdings highlighted in Green, we believe, are available at prices that rational investors would consider reasonable and attractive.
