Month: January 2019

Uncommon Sense January 2019

Good Morning,

Attached is the most recent Uncommon Sense piece from Mike Arone at SSGA. Mr. Arone explains what he believes will be three market surprises in 2019:

1.) Repeat of U.S. Fiscal Policy

2.) Financials will outperform the broader market

3.) Junk bonds will fail to rebound

As we start the year, investors will read hundreds, even thousands, of different market predictions for the year ahead. Even the smartest market prognosticators with the best track records get these types of things wrong, so Mike’s “surprises” provide an interesting take on forward looking projections.

Thank You,

Pete

Peter Malone, CFA

Research Analyst

Direct: 617.226.0030

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square

Suite 500

Boston, MA 02109

www.crestwoodadvisors.com

January-Uncommon-Sense – 2019 Surprise Predictions.pdf

Updated Crestwood Holdings Presentation

Good Morning,

Attached is the updated holdings piece that provides a snapshot of our ETF and mutual fund investments. Each slide discusses the investment process, performance history, and why we like each product.

 

If anybody has specific questions please let me know.

Thank You,

Pete

Peter Malone, CFA

Research Analyst

Direct: 617.226.0030

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square

Suite 500

Boston, MA 02109

www.crestwoodadvisors.com

Holdings Presentation 12.31.18Download

SHW Update

SHW is down after releasing preliminary sales and earnings results this morning that were weaker than expected. Q4 sales were up 2% vs guidance of up mid-single-digits. Sales were negatively impacted by architectural paints in the US, driven by weak results in October and November (they gave guidance on Oct 25). Architectural Paints consist primarily of the chain of paint stores which had SSS of +3%. Of that, 2.5% was pricing so volumes were flattish. Sales rebounded a little in December and continue to improve. Sales for Consumer Brands and Performance Coatings Groups also fell short of expectations. Performance Coatings was particularly weak in China. As a result of the revenue miss, adj. EPS for the full year is now expected to be $18.53 compared to guidance of $19.05 to $19.20. Street was at $19.11. Their quarterly call is on Jan 31.

$SHW.US

[tag SHW]

[category Equity Research]

Sarah Kanwal

Equity Analyst, Director

Direct: 617.226.0022

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square, Suite 500

Boston, MA 02109

www.crestwoodadvisors.com

Update on Apple

Talking points on Apple’s lowered guidance for Q1:

· Guidance lowered primarily because of weaker iPhone sales in China.

· Timing is causing concern because of maturing smartphone market (declined in 2017 & 2018).

· Weakness in China may be more macro related than Apple specific. Overall smartphone sales were down 8% in China in Q318 – other indicators of a softening economy (especially with luxury) include commentary from TIF, COH, SBUX, Auto manufacturers and December PMI in contraction. China is the largest market globally for smartphones (about 1/3 of the industry). iPhones sold in China only account for about 12% of Apple’s revenue.

· The last time Apple’s multiple was this low they were experiencing big declines in revenue in China – from 2016-2017 they had 6 consecutive quarters of declines and were losing share.

· Trading at an 8.5% FCF yield implies no growth. Apple has ~$130B in net cash on their balance sheet. That’s about $27/share or 19% of their market cap. They’re trading at about a 12x P/E or closer to 10x ex-cash.

· Goal of net cash neutral means they have ~$300B of cash to spend in the next 3 years or so, which is over 40% of their market cap.

· Apple reports earnings on Jan 29.

$AAPL.US

[category Equity Research]

[tag AAPL]

Sarah Kanwal

Equity Analyst, Director

Direct: 617.226.0022

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square, Suite 500

Boston, MA 02109

www.crestwoodadvisors.com

AAPL down on reduced guidance

Apple reduced their Q1 guidance (they report results on Jan 29). Revenue guidance was reduced almost entirely on weaker performance in emerging markets, particularly with iPhones in Greater China. AAPL expected some weakness in emerging markets, but it turned out to have a significantly greater impact than they had projected. In a letter to investors Tim Cook pinned this on trade tensions and a weakening economy in China. “Market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp” – so likely not just an Apple issue. Service segment revenues in China were strong and installed base of devices grew.

Overall, Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and is on track to achieve their goal of doubling the size of this business from 2016 to 2020.

$AAPL.US
[category Equity Research]
[tag AAPL]

Sarah Kanwal

Equity Analyst, Director

Direct: 617.226.0022

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square, Suite 500

Boston, MA 02109

www.crestwoodadvisors.com