Equities
47%
| Date | Update |
|---|---|
| September 20, 2019 |
How are you expecting U.S. equities to finish out the year? Our global tactical asset allocation model still indicates a cautiously bullish outlook for the U.S stock market in the near-term. However, the long-term signals have decreased recently. The short-term targeted equity level at the moment is around 90% while the long-term signals indicates a target level of about 70%. An area of concern is that the probability of a recession has slightly grown. We monitor a number of data points to help determine the probability of a recession. For example the yield curve, which went into a deeper inversion, contributed to the elevated odds. However, we don’t expect a recession to occur in the near future since the macroeconomic data points we monitor are still relatively upbeat. Industrial production rose 0.6% in August, its third increase in the last four months. The total capacity utilization also rose 0.4%. Some macroeconomic and sentiment figures are less optimistic including the labor market and PMI data. The labor market moderated further in August. Payrolls increased by 130,000 jobs, bringing average growth to 158,000 per month this year, far below the 2018 pace, confirming suspicions that the pace of hiring has cooled. Also, U.S. PMI data has been decreasing every month since March this year. In August, the PMI data indicated that the U.S. manufacturing sector is contracting for the first time since the end of the energy rout. The ISM manufacturing index fell from 51.2 in July to 49.1 in August, the lowest reading since January 2016 and below the neutral threshold level of 50.
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| February 25, 2019 |
NorthCoast CAN SLIM® was among the top performers in Q4 2018 versus its peer group and recognized as a Top Guns Manager by Informa Investment Solutions' PSN. “I’m proud of our investment team. 2018, especially the fourth quarter, was a challenging environment for many equity managers, and we’re pleased to see our flagship strategy achieve such a high honor.” - Dan Kraninger, NorthCoast President & CEO Click the link here to read the entire press release. |
| January 10, 2019 |
Cash is King | The cash held in the portfolio was a helpful contributor to the overall performance in 2018. Among the most beneficial time frames was at the end of Q4, when the strategy held an approximately 30% cash position throughout December as near-term growth outlook was hindered. While stocks declined -9% on the month, the defensive cash position buoyed the CAN SLIM® Investment Strategy, which declined only -5.7% in December, softening the blow. In fact, the cash in the strategy had a greater positive impact on overall performance than any individual holding during the entire year. |
| January 8, 2019 |
Q4 | Equities experienced one of their worst Octobers in a decade when major indices fell over -16%. The almost +3% move over the final two days of the month buoyed stocks for a temporary relief but they still finished the month down almost -7%, the index’s worst month in 7 years. Rising interest rates, a stronger dollar, and continued escalation of trade conflicts with China could have all attributed to falling stock prices as investors reevaluated their outlook on future growth. The brief pullback provided a small buying opportunity as we increased exposure to 88%, a final high point on the year. As equities experienced a modest bump in November, we removed exposure in anticipation of further decline to end the year. We entered December with 30% cash and reached a high cash level of 35% after the 1st week of trading. Then as stocks continued to trade negatively with major volatility, we marginally increased our equity exposure throughout the month as valuations became more attractive along with the lack of real economic data warranting a substantial decline. |
| January 1, 2019 |
What is your outlook for the U.S. equity market for 2019? Our global tactical asset allocation (GTAA) model still signals a relatively bullish outlook for the U.S. equities. Strong readings in sentiment and valuation indicators outweigh weaker technicals and recent price pullbacks. In 2018, the U.S. economy enjoyed a banner year with real GDP annual growth rate on track to increase by close to 3%, which is the strongest gain of the nearly decade-long expansion. We believe the deficit-financed tax cuts and government spending increases will continue to help the economy grow much of next year. We also expect the labor market to continue to grow and unemployment to stay low by historical standards. Despite these positive signals, we do recognize some possibilities of weakness moving forward. The stimulus effect might fade and put downward pressure on the market in the longer term and diminishing labor supply might result in gradually decreasing prices. The ceasefire between the U.S. and China may indicate that the worst of the escalations are behind us. However, the trade tension remains and might contribute to equity volatility. We do expect some market volatility to continue through 2019 despite our model indicating that the odds of a near-term recession remain relatively low. |
| December 24, 2018 |
Cigna Corporation annouced a deal to acquire Express Scripts Holding Co. The deal was completed on 12/21/2018 to be paid out in cash and stock. Holders of ESRX will see the corporate action in process today and is expected to settle on Wednesday 12/26. For each share of ESRX, owners will receive $48.75 and 0.2434 shares of Cigna (Ticker: CI). For additional information please click HERE |
| October 8, 2018 |
Q3 | Despite unsettling news in the tech sector, U.S. equities rose in July on a more optimistic trade outlook, generally positive earnings data and economic growth. Lagging growth abroad was a point of concern with important events such as Brexit decisions and trade discussions on the horizon. Domestically, the economy remained strong but trade uncertainty still casted a shadow. Technology stocks and more positive economic data bolstered U.S. equities in August despite continued trade uneasiness. The bull market became arguably the longest on record in August. The Federal Reserve would raise rates again in September, the 3rd time this year, putting pressure on bond issuances with higher borrowing costs, stoking fear of possibly less private-sector investment. Despite only a modest rise in September, the S&P 500 had its best quarterly return since 2013. The strong quarterly returns for U.S. equities were a sign that investors were prioritizing the solid corporate earnings and positive economic data over global trade tensions. Throughout Q3, we averaged an 80% equity exposure. |
| July 8, 2018 |
Q2 | Our model recognized elevated levels of risk in the equity market and we reduced exposure accordingly, reaching a 70% equity exposure at the end of April and maintaining that posture into June. Among the key indicators, only the macroeconomic data remained bullish during this stretch. P/E multiples continued to make equities overpriced versus historical averages, a relatively low volatility index (VIX) predicted possible complacency in the bull run and key consumer surveys, such as the University of Michigan Consumer Sentiment survey, decreased over multiple months. Sentiment data provided a cautiously optimistic stance as U.S. consumers, now with reported higher wages, were more upbeat about their current financial situations. Alternatively, the U.S. administration’s additional tariffs on China raised trade concerns which could increase uncertainty and dampen the collective consumer and producer sentiment. The late June pullback provided a buying opportunity and we increased our exposure to 80% to close out the quarter. |
| April 5, 2018 |
Q1 | January saw both a very hot start to the year for equities as well as the largest daily decline since August of last year. Low yields had been supporting the sky-high equity valuations but, as bond yields increased, they began to impact our outlook on future return potential. With early risks of 2018 taking shape, we began to decrease exposure from 95% to 85%. At the end of January into February, the market sold off, declining almost 8% in just over a week. Viewed as an overreaction, we sent out research explaining our continued opportunistic position (“An Expected Change in Volatility”). Markets rebounded over the next month. Overall, the first quarter experienced a large increase in market volatility and surprising headline risk. However, our outlook remained positive. Beneath the headlines, fundamentals remained strong with the U.S. and global economies expanding along with corporate earnings. Aided by rebounding producer and consumer survey results and long-term market momentum, the majority of macroeconomic, sentiment and technical indicators were positive. |
| October 24, 2017 |
Over the third quarter of 2017, the strategy was up 3.0% net of fees, while the S&P 500 Index was up 4.3%. To better understand this quarter’s performance in the context of the broad market, we analyze the strategy’s attribution versus the S&P 500 Index. Strategy attribution analysis helps to break down CAN SLIM® performance relative to the index. First, we consider the allocation of cash held in the CAN SLIM® strategy during the quarter. The average cash position was 18.3%, which had a total negative affect on our portfolio’s relative performance of -0.8%, as cash served as a slight deterrent on strategy performance with the index moving higher over the quarter. While cash helps protects assets in down-trending markets, it is a hindrance when equities rise. This is a strategic trade-off when utilizing a cash scaling technique. You can read more about the way we scale to cash here. Second, we compare the strategy’s sector allocation versus the index. The largest allocation differences versus the S&P500 Index were overweight Information Technology and underweight Energy, Consumer Staples and Utilities. Overall, our sector allocation decisions had a +0.3% impact on the relative performance, as technology stocks outperformed the general index and the over exposure boosted returns. Finally, we inspect the impact of stock selection within the sectors. This contribution was positive in Industrials and Consumer Staples while negative in Information Technology and Health Care. Together the stock selection effect was a negative contributor to the performance of the strategy with a -0.8% contribution. |
| February 1, 2017 |
Citrix first announced plans for the spinoff of its GetGo division in November 2015. Last July, an agreement was reached with LogMeIn(LOGM) to merge with GetGo immediately post spin off in a Reverse Morris Trust transaction. Citrix announced that shareholders of record on January 20 (which includes NorthCoast clients in CAN SLIM®) will receive approximately .1718 shares of LogMeIn on January 31 for each Citrix share owned. The final ratio will be based on the actual number of outstanding shares on the record date. After the transaction, Citrix shareholders will own approximately 50.1% of LogMeIn. More information on the split can be found here. *The spin off may impact how you view your portfolio in that Citrix (CTXS) spun off GetGo resulting in a reduction of the value of your Citrix stock in exchange for 0.1718 of LogMeIn (LOGM) per share owned of Citrix. This will adversely affect the balance of your account today by a negative of 0.40%, because the value of the new position is not yet being included into the current account value. When reading your account performance today, you should increase the value by approximately 0.40%. If you have more questions about the transaction, please reach out to your NorthCoast Advisor. |
| January 15, 2017 |
The NorthCoast CAN SLIM® investment program returned a composite +3.0% in 2016, in an upward moving year where stocks grinded along until the November election propelled stocks to end the year on a mini rally. Click here for a full review of the CAN SLIM® strategy in 2016.
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| January 12, 2016 |
The CAN SLIM® Investment Program aims to achieve two goals, both equal in their importance to long-term performance: 1) appreciate capital and 2) preserve capital. The following report provides in-depth analysis into the successes and challenges of the strategy throughout 2015, important research into the mechanics of the strategy, and a brief outlook for 2016... Click here to access the complete report.
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| September 1, 2015 |
As equities declined in August, CAN SLIM® experienced a pullback in line with the S&P 500. After the unexpected decline, CAN SLIM® sought to take advantage with purchases of AAPL, GS, and VLO. |
| August 10, 2015 |
For a strategy that aims to 1) appreciate capital while 2) protecting on the downside, finding a comparable fund or benchmark is challenging. In the following report, NorthCoast highlights appropriate methods when analyzing CAN SLIM® performance and breaks down the cost of playing defense in a full-market cycle. Click on the report below to review.
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| July 1, 2015 |
Much like the majority of equities, CAN SLIM® slid in June. The strategy lags the benchmark YTD as its cash holding and stock selection hindered growth. The strategy aims to take advantage of the recent decline by adding exposure at attractive entry points. |
| June 30, 2015 |
After a disappointing quarterly earnings result in which the company stated a weak PC market hurt its business, Micron (MU) experienced a double-digit sell-off on Friday (6/26). As the stock crossed its designated sell-stop, the position was liquidated and removed from the strategy. President & CEO Dan Kraninger shares some thoughts. |
| June 16, 2015 |
“Merger talk in the health-insurance industry is heating up as firms grapple with the challenges and opportunities the federal healthcare overhaul has created. UnitedHealth (UNH) has reportedly approached Aetna about a takeover deal that would likely be valued at more than $40B.” – Seeking Alpha. UNH is now +6% versus a +0% market (S&P 500) since the original purchase on May 1. On June 8, we increased our position in the holding from 2% to 4% based on positive indications of future growth potential. |
| June 2, 2015 |
With a quarter of the strategy in cash, CAN SLIM® relied on stock selection to outperform the S&P 500 in May. While stocks such as AA, DAL, and UNP hampered performance, EA, GILD, and UNH helped the strategy outperform the broad market for the month and move positive for the year-to-date. |
| May 4, 2015 |
With high valuations and weakening macroeconomic data, CAN SLIM® reduced almost 10% of its equity exposure over the month. Low-scoring stocks were sold either as weak performers or companies whose performance exceeded the benchmark and profits were locked in. |
| April 6, 2015 |
CAN SLIM®’s equity exposure and growth universe guided performance in Q1. The strategy added exposure during the January pullback and benefited from February’s rebound. The omission of mega-cap names (i.e. AAPL) diminished relative strategy performance against the general market, and enters the 2nd quarter with a close eye on earnings season. |
| March 3, 2015 |
After starting the month 91% invested, CAN SLIM® began liquidating positions to reduce exposure as market outlook slightly weakened in the near-term. The strategy rebounded from a negative January with select positions (e.g. C, ECL, TXN) posting double-digit gains for the month. |
| February 26, 2015 |
Hewlett-Packard (HPQ) missed analysts sales forecasts on Wednesday, causing a roughly 9% sell-off in the name. However, with reports that the company is looking to acquire Aruba Networks (ARUN), ARUN jumped over 20% on the news and provided an overall boost to the portfolio. With the ncreased value in ARUN, the strategy is locking in profit and reducing exposure in the name. |
| February 11, 2015 |
In an effort to reduce strategy beta in CAN SLIM®, the position in AMG (Affiliated Managers Group) was sold, as future growth potential weakened in the stock. |
| February 2, 2015 |
With a high equity investment level near 90% for most of the month, CAN SLIM® felt the effects of the broad market pullback. So far earnings season has produced mixed results. Examples are demonstrated by BIIB on the positive and MSFT to the negative. |
| January 19, 2015 |
Why hold GOOGL?
Since original purchase on 8/27/14 in CAN SLIM, GOOGL is currently -11.6%.... Why still hold it? The stock holds relative value as the recent pullback boosted its attractiveness and analyst sentiment remains positive with its annoucement to compete with big players like Verion/AT&T/Sprint in the mobile service provider community. |
| January 8, 2015 |
Delta Airlines (DAL) took flight in 2014 as top-performing stock in CAN SLIM. Coming off near lows in October, the stock increased +60% in value to end the year +75% in the portfolio. The position was originally purchased on 1/2/2014. |
| January 6, 2015 |
With a high equity investment level near 100% and a low at 65% invested, CAN SLIM® navigated a volatile yet positive 2014. Keeping in line with the S&P 500, CAN SLIM posts a double-digit gain for the 2nd year in a row as quality stock picking and improved risk metrics propel the strategy. |
| December 2, 2014 |
CAN SLIM® held an average 78% equity exposure level throughout November as U.S. equities continued to increase. The increased cash position weighed on performance but stocks within the strategy performed well overall. Positions such as M, VIAB, and V were liquidated and replaced with BIIB and an increase to our GILD position. |
| November 5, 2014 |
CAN SLIM® held its investment level during the October decline which aided in the rebound it experienced at the end of the month. As positions were liquidated at designated sell-stops, new positions were added at attractive entry points. Weakness in technical and valuation indicators provided reason to decrease exposure moving into November. |
| October 1, 2014 |
Tactical growth strategy focused on capital appreciation. Invests in leading growth stocks in favorable market environments. Scales to cash to preserve gains when unfavorable market risk is high. Positions are managed through a combination of CAN SLIM® guidelines and a proprietary stock scoring system designed to build a comprehensive growth portfolio. |
