Nov 9, 2016
Liz Miller's Top Picks: November 9, 2016
Liz Miller, president of Summit Place Financial Advisors, LLC
Focus: U.S. equities
Uncertainty reigns. Twenty-four hours ago, I was a mother accompanying her newly-minted 18-year-old daughters to the voting polls. Together, we thought we might be electing the first female president. Twelve hours ago, like many of you, I was glued to every device, increasingly considering the economic and market consequences of the election outcome.
At one point last night, S&P 500 futures were trading down five per cent. As of 7:45 a.m., they are down 1.5 per cent. Yes, we expect a down day in the market, and some sort of sell-off could have been anticipated no matter which candidate won the election. Today’s action, as we have noted too many times before, reflects the deep policy uncertainty surrounding President-Elect Donald Trump.
There is not much I can add at this point regarding potential policies and their effects on our country or our economy beyond what we have all read from informed political sources. In the coming weeks and months, the policy uncertainty will fade. The transition team will name the new president’s advisors, policy priorities will be better articulated and party cooperation will clarify. Eventually, the markets will find a new balance.
Today is not the day to make drastic changes in investment strategies. I have raised higher levels of cash recently in most accounts and any recent buying has been in positions I believe can do well going forward no matter our leadership. While I continue to believe that volatility in the markets provides a long-term buying opportunity, we will wait for more clarity and political wisdom before reaching new conclusions about our country’s future.
We are still actively buying the two top picks (LNC and SBUX) from last time.
LINCOLN NATIONAL CORPORATION (LNC.N)
The company is well positioned for long-term growth, given its focus on reducing exposure to its businesses with long-term guarantee. The company also remains relatively immune to the DOL-proposed rule unlike many other insurance companies due to its very small qualified variable annuity business. Its strong capital position is another positive and allows it to further benefit even with modest interest rate increases.
With valuations across the restaurant and retail industry retrenching after a less-than-stellar second-quarter reporting season, Starbucks now looks like a very attractive entry point for longer-term investors. New mobile order/pay, Starbucks Reserve premium coffees and Teavana teas are good future drivers of sales and growth across the world, and a China/Asia expansion could make SBUX the MCD global growth story.
With the rise of streaming and various licensing agreements for sports, DIS has been under pressure for quite some time, primarily due to its ESPN franchise. On the backs of Comcast buying DreamWorks and ATT buying Time Warner, we think Disney’s media position has strengthened as non-industry experts attempt to merge into the content space. Neither Comcast nor ATT, in our opinion, have the correct corporate cultures to effectively run and grow these media assets. This puts Disney in an even stronger position in the industry and we believe the company will figure out a profitable strategy for ESPN going forward.
PAST PICKS: SEPTEMBER 26, 2016
LINCOLN NATIONAL CORPORATION (LNC.N)
- Then: $45.52
- Now: $56.60
- Return: 24.34%
- TR: 24.97%
- Then: $54.04
- Now: $54.51
- Return: 0.86%
- TR: 0.86%
PHLLIPS 66 (PSX.N)
- Then: $79.47
- Now: $81.79
- Return: 2.91%
- TR: 2.91%
TOTAL RETURN AVERAGE: +9.58%