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:
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:
|Illinois Tool Works||ITW||-2.20%||-2.27%||2.14%||34.48%|
|Archer Daniels Midland||ADM||0.00%||3.02%||3.02%||27.37%|
|Automatic Data Processing||ADP||-0.51%||7.32%||17.29%||25.23%|
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