John Stephenson, President and CEO, Stephenson & Company Capital Management

Focus: North American large caps and resource stocks
_______________________________________________________________

Market Outlook
The Federal Reserve’s recent policy statement has highlighted that we are going to be lower-for-longer in terms of interest rates. Investors should continue to over-weight income-producing securities in their portfolios and reduce their exposure to financials and growth-oriented securities.

Top Picks

BUY: Vodafone (VOD.O) – Last bought on August 25, 2016 at $33.17

Strong dividend — approximately 6.7 per cent yield. Second top cellphone provider in Germany, and the U.K. represents only 10 per cent of its value. Better valuation than U.S. peers.

SHORT: Shake Shack (SHAK.N) – Shorted on September 12, 2016 

Valuation is very stretched; it trades at a 70 x P/E. Limited insights into when any meaningful economic rebound will begin — earnings guidance very muted. A widening price gap between eating at home versus eating out. Tougher comparisons with a resurgent McDonald’s and slowing same store sales.

BUY: Medtronic (MDT.N) – Last bought on August 25, 2016 at $84.60

Company can grow EPS at double-digits over next five years. MDT should be able to grow the top line at mid-single digit over the next five years. Increased access to international cash should unlock value for shareholders.
 

 
Past Picks: October 13, 2015

Nike (NKE.N)

• We sold on December 23, 2015.
• The company had a good run but it started to roll over as consumer discretionary stocks had started to run out of steam.
• It’s a high quality name, but has not been working for a while.
   
• Then: $62.91
• Now: $55.15
• Return: -12.33%
• TR: -11.39%

MetLife (MET.N)

• We sold on July 29, 2016.
• We had a large allocation to financial stocks and in a lower-for-longer interest rate environment it was time to exit.
• It was part of a broader culling of financial names in our fund.
   
• Then: $47.88
• Now: $44.52
• Return: -7.02%
• TR: -3.64%

Mondelez International (MDLZ.O)

• We sold on February 5, 2016.
• Is a high-quality name that had been underperforming our fund for a while.
• Consumer discretionary names were looking toppy at the time.
   
• Then: $44.84
• Now: $43.16
• Return: -3.75%
• TR: -2.59%

Total Return Average: -5.87
 

Company Twitter Handle: @Stephenson_Co

Personal Twitter Handle: @StephensonFiles

Company Website: www.stephenson-co.com

Blog: www.stephensonfiles.com