On the year-opening run-up and the “Trump Bump”…

In many respects, 2017 picked up where 2016 left off. President-elect Donald J. Trump dominated headlines early in the first quarter, interest rates were pivotal to most investing conversations and the U.S. stock market ran up. But subtleties really defined the first three months of the year.

 

Trump was sworn into office in a somewhat bizarre inauguration featuring a crowd of more than 10 people but fewer than 10 million people (I think we can all agree on that). And despite his constant receipt of credit for up days and blame for down days, it’s hard to see any immediate investing impact from the policies he’s initiated early on. The market “likes” Trump in that the market has liked stocks during his brief tenure in office, but we’re reticent to embrace the “Trump Bump” terminology as anything more than a clever nursery rhyme that oversimplifies an expanding economy.

On recent buys…

Our expanded investment committee really began to hit its stride in the latter half of 2016, and the added voices, valuation methodologies and perspectives has raised the threshold for buying or selling securities. Given that improvement and the market rise, there were fewer “buy for everyone” prospects in the opening months of this year. We found value and found appropriate places for those opportunities, but many of the new names we added were selected sparingly based on risk tolerances and the majority of our stock additions were familiar names to client portfolios—like Anheuser-Busch (ticker BUD), Citigroup (ticker C), Cigna (ticker CI), General Motors (ticker GM) and Alphabet (ticker GOOG).

 

We added to positions in Cousins Properties (ticker CUZ) for many clients in the low-$8 range. We also picked up shares of CVS Health Corp. (ticker CVS) for many accounts. We believe CVS is undervalued by most metrics and we like that is has exposure to healthcare (through its pharmacy business) but also acts like a consumer staple.

On recent sells…

On the sell-side, we exited GameStop (ticker GME) primarily due to a lack of confidence in management and the absence of a clear turnaround strategy. Frankly, the stock is cheap but seems likely to remain cheap (or cheaper) for the foreseeable future. We also exited positions in TEVA, primarily in the $35-$36 range. The stock has continued to sell off and was trading below $32 at the time of this publication.

 

Our first quarter newsletter can be read in its entirety here.


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