CWS Market Review – July 5, 2019

“The laws of probability, so true in general, so fallacious in particular.”
– Edward Gibbon

The trading week was shortened by the July 4th holiday. As a result, there wasn’t much news. Sensing this, many Wall Street big shots took off for the Hamptons, causing the usual financial frenzy to be cut short.

I want to take advantage of this lull in market news to summarize our Buy List at the midpoint of the year. I’m happy to report that our Buy List is doing quite well this year.

We also had a somewhat poor ISM report on Monday. This could be further evidence that the Fed will cut rates at its meeting later this month. I’ll review the latest numbers. But first, let’s look at how well our Buy List is doing in 2019.

Our Buy List Is Up 23.21% This Year

I’ll be honest: at the start of the year, I would not have guessed that stocks would do so well in 2019. Fortunately, we always stay in the market and so don’t miss out on any unexpected surges.

The stock market closed early on Wednesday and was closed all day on Thursday. At the closing bell on Wednesday, the S&P 500 reached 2,995.82. That’s another all-time high.

For some context, the index first broke 300 in 1987. The old version of the index broke 30 in 1929. We may break 3,000 any day.

Now let’s look at some numbers. Through Wednesday, our Buy List is up 22.48% on the year compared with 19.51% for the S&P 500. Including dividends (and I always include dividends in our final calculation), we’re up 23.21% while the S&P 500 is up 20.75%.

Our “beta” is running at 0.800 which is bit low compared with previous years (in reality, I don’t pay much attention to it). There’s been a 90.1% correlation between the daily changes of our Buy List and those of the S&P 500.

Our Buy List generally yields about 1%, which is about half the yield of the S&P 500. I don’t plan it this way, but that’s usually how it works out. We’re running a little higher this year.

Twenty of our 25 stocks are up this year. The biggest winner by price percentage is FactSet (FDS). FDS is currently up 47.93% for us this year. Moody’s (MCO) isn’t far behind at 44.68%.

We have four positions up more than 40%, and seven are up more than 30%. Fourteen of our stocks are up, beating the market this year. Sherwin-Williams (SHW) is just a tiny bit behind. Our worst stock this year is Hormel Foods (HRL). The Spam stock is down just over 2%. On Thursday, eight of our Buy List stocks touched new 52-week highs.

Our sells from last year aren’t doing that well. Alliance Data Systems is down 2% this year. Ingredion is off by 8%. Snap-on is up 12%. Wabtec is up by 5%. Carriage Services is the big winner with a 22% gain.

Our most dramatic stock this year has been Cognizant Technology (CTSH) which dropped 18% over the course of two trading sessions. It’s still up a bit for us this year. Due to broad diversification, the drop didn’t shake our portfolio much.

I nearly forgot the most important part—we didn’t make a single trade all year. Yet we still beat the market, and we did it with lower volatility.

Here’s a look at how each stock has done, along with its dividend-adjusted gain.

Symbol 31-Dec 3-Jul Gain Adj Gain
AFL $45.56 $56.85 24.78% 26.11%
BDX $225.32 $255.24 13.28% 14.00%
BR $96.25 $131.85 36.99% 38.14%
CPBX $25.45 $26.08 2.48% 2.48%
CERN $52.44 $74.53 42.12% 42.48%
CHD $65.76 $75.04 14.11% 14.86%
CHKP $102.65 $119.47 16.39% 16.39%
CTSH $63.48 $64.18 1.10% 1.71%
DHR $103.12 $145.31 40.91% 41.27%
DIS $109.65 $142.98 30.40% 30.40%
EGBN $48.71 $54.23 11.33% 11.77%
FDS $200.13 $296.06 47.93% 48.73%
FISV $73.49 $94.23 28.22% 28.22%
HRL $42.68 $41.77 -2.13% -1.16%
HSY $107.18 $138.00 28.76% 30.31%
ICE $75.33 $88.59 17.60% 18.42%
MCO $140.04 $202.61 44.68% 45.49%
ROST $83.20 $100.00 20.19% 20.85%
RPM $58.78 $62.30 5.99% 7.30%
RTN $153.35 $173.45 13.11% 13.70%
SBNY $102.81 $123.97 20.58% 21.62%
SHW $393.46 $470.16 19.49% 20.12%
SJM $93.49 $119.73 28.07% 29.99%
SYK $156.75 $208.15 32.79% 33.49%
TMK $74.53 $91.63 22.94% 23.69%
Buy List 22.48% 23.21%

The 10-Year Yield Drops Below 2%

On Monday, the ISM report for June came in at 51.7. That’s the lowest since October 2016. Then on Wednesday, the ADP payroll report came in light. That helped send the 10-year Treasury down to 1.96%. That’s the lowest yield since late 2016.

We’ll learn more about the state of the economy in the jobs report, which is coming out later today. Wall Street seems convinced that the Fed will cut rates at the end of this month. I can’t say I share their certitude.

I need to make a correction to last week’s issue. Danaher (DHR) shareholders will not get shares of Envista, the dental spinoff. Instead, it will IPO and Danaher will retain a position. In effect, we’ll still own it, but only via DHR.

That’s all for now. The June jobs report is due out later today. Next Tuesday, Jerome Powell will be speaking at a Fed conference on stress testing. We might get clues as to what the Fed is thinking on the economy. Folks pay careful attention to every remark he makes. Then on Thursday, the CPI report for June is released. We’ll also get an update on the budget for this year. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Posted by on July 5th, 2019 at 7:08 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.