2016 is a history. 2017 is coming. Let’s have a quick view on performance of some companies in 2016, maybe it will bring some investment ideas. S&P500 finished year with around 9.5% gains, adding dividends gives us more than 10% total return. That’s ok, but in fact it is more or less in line with long term growth of many good companies (3-4% growth + 3-4% return to shareholders).

Let’s see on best and worst performing companies:

Name Ticker 7D 30D 3M 1Y
HCP HCP 1.19% 3.88% -20.98% -22.26%
Cardinal Health CAH -1.51% 1.47% -5.04% -18.17%
VF Corporation VFC -0.80% -4.34% -4.70% -12.35%
Hormel Foods HRL -1.75% 4.57% -1.75% -10.99%
Abbott Laboratories ABT -0.49% 2.15% -9.73% -10.53%

 

Well, as it comes to HCP we should note that there was spin off. Adding around 3$ per share spun off then return for 1 year is around -12%, and adding high dividend 5-6% we come to around 5% (roughly, sorry for being lazy and not checking accurately J as Warren Buffett says: It is better to be approximately right than precisely wrong.)

Removing HCP from the list we got:

  • CAH (I am long, and so far so good)
  • VF Corp – this might be a good buying opportunities
  • Hormel Foods – now neutral for me, but keep in mind that company is growing fast, maybe I am too cautious
  • Abbott Labs – case of acquisition, is it a good move? No one knows for 100%… I need to update myself, but there is a story to be played by investors, valuation is not super high…

 

From the other side many names with strong growth above 20% in 2016:

Name Ticker 7D 30D 3M 1Y
Nucor Corporation NUE -3.80% -3.92% 21.92% 50.49%
Sysco Corporation SYY -1.42% 4.27% 13.18% 36.35%
Illinois Tool Works ITW -2.20% -2.27% 2.14% 34.48%
Chevron CVX -0.44% 3.89% 14.89% 32.47%
Cintas CTAS -0.85% -0.28% 2.79% 30.89%
Archer Daniels Midland ADM 0.00% 3.02% 3.02% 27.37%
Automatic Data Processing ADP -0.51% 7.32% 17.29% 25.23%
AT&T T -0.28% 9.39% 4.32% 23.81%
CR Bard BCR 0.51% 8.60% 0.40% 22.16%
3M MMM -0.20% 3.44% 2.02% 21.63%
Dover DOV -1.82% -0.79% 1.92% 21.56%

 

Unfortunately I am the shareholder only of ADM. Most of these companies are traded on high multiples (though I am not updated on every single name). Nucor and Sysco seems expensive, ITW reasonably priced (it was so cheap one year-ago…), CVX not understandable for me and many others…

Let’s look on my portfolio and what 2017 might bring:

  • WMT – not expensive valuation, though Amazon is growing very fast. I expect some significant improvement in e-commerce in WMT -> then there is potential for rerating. On the other side, how much downside there is? 7 times EV/EBITDA is for me a super occasion so max drawdown is 15% in my opinion.
  • ADM – I expect margins to improve, nevertheless after strong 2016 performance I do not expect company to perform as well. Potentially it is sell, when share comes to all-time high (risk/reward is getting unsatisfactory then)
  • AAPL – demanding year is coming, should we expect any blockbuster? Well, valuation is not high and what I expect is Trump to allow company return cash to investors, this is my main bet for 2017.
  • BEN – similarly to above, valuation is not high and what I expect is Trump to allow company return cash to investors, this is my main bet for 2017.
  • GILD – Time is working for investors, company is generating a huge amount of cash. Just do it, return it, and hopefully make some progress toward new blockbusters.
  • CAH – well I do not expect anything special from CAH, market is going to be tough. Just please deliver consensus at around EPS = 6 and everyone should be happy J

 

Summing up, having only 6 companies in portfolio so far makes review quite easy. For now situation looks OK and potentially the first company to be sold is ADM, but keep waiting. Silence is a virtue and patience is golden. What I really expect from 2017 is depreciation of USD. I want to buy more USD for further buys, and currently EURUSD is around all-time-lows…

 

Disclaimer: Long WMT, ADM, AAPL, BEN, GILD, CAH