BEXIX – Q4 2017 Commentary
The Baron Emerging Markets Fund underperformed its benchmark during the fourth quarter but substantially outperformed for 2017. The team has taken advantage of its unique forward looking, bottom-up approach and feels the portfolio is well positioned in the current market environment.
MWTIX – Q4 2017 Commentary
The MetWest Total Return Bond Fund performed generally in line with the Barclays Aggregate during the fourth quarter and the full year in 2017. The slight lag in performance came as a result of the fund’s defensive positioning with an underweight to corporate credit and an emphasis on quality sectors.
TIREX – Q4 2017 Commentary
During the fourth quarter, the TIAA CREF Real Estate Securities Fund outpaced the FTSE NAREIT Index and beat the benchmark by nearly 350 bps in 2017. The team benefitted from strong security selection as well as strategic allocation positioning within the retail space.
HILIX – Q4 2017 Commentary
The Hartford International Value Fund outperformed its index and peer group during the quarter and outperformed the index by over 250 bps in 2017. The team maintains its strong track record by focusing on bottom-up stock selection that, in turn, also drives alpha through sector allocation.
Exxon released 4Q17 earnings and cash flow below consensus expectations, driving the stock lower today. In addition, investors were expecting a share buyback announcement that did not materialize. The next catalyst for the stock is its March’s analyst day where a more detailed capital allocation plan will be released. We are maintaining our position size and price target. Continue reading “Exxon 4Q17 earnings results disappoint but no change in long term thesis”
Sensata (ST) reported 4Q17 organic sales +5.2% and adjusted EPS +14.5%. For 2017, organic sales growth was 4%, and adjusted EBIT margin expanded by 100bps. 2017 was a strong year of new design wins for Sensata, leading the way to another year of growth. The company is performing in line with our expectations regarding margin improvement and deleveraging, paving the way for more M&A in the future. We are maintaining our price target and position size. Continue reading “Sensata 4Q17 earnings results: thesis is playing out, we still see some upside going forward”
• My view is that it won’t have an impact near term to CVS, but longer term it could be disruptive. I think it will give them a bigger negotiating power over health insurance costs.
• This is not the first time large companies try to form an alliance to resolve this high healthcare cost issue: the Health Transformation Alliance, a group of 40+ large employers, covering 6 million lives, was formed to reduce costs (http://www.htahealth.com/). The group was looking to partner with CVS & Optum to reduce costs.
• Just a reminder that CVS has a higher share of the Medicare Part D scripts, representing 30% of CVS PBM scripts (according to Morgan Stanley), which is more profitable and not targeted by the AMZN/JPM/Berkshire JV. CVS’s Silverscript subsidiary is the #1 PDP insurance company by enrollment with 5.5 million lives as of January 1, 2017, accounting for 22% of total Part D lives. Continue reading “Healthcare comments related to Amazon/JP Morgan/Berkshire news”
Stryker reported strong 4Q 2017 organic sales of +8.1% and EPS +10%, and full year 2017 organic sales of +7.1% (above its latest guidance) and EPS growth of +12%. The stock is consolidating after market on lower 2018 guidance vs consensus, but as a reminder the stock was up ~9% year-to-date, and the management team tends to guide conservatively. We think 2018 guidance to be very decent at +6-6.5% which is better than medtech peers. Overall Stryker continues to perform well and we raise our price target to $188. Continue reading “Stryker 4Q2017 earnings results were good, guidance for 2018 disappoints the market but in line with our expectations”
Lockheed Martin reported 4Q 2017 earnings today that were in line with expectations. The initial 2018 outlook lifted the stock as LMT is using a lower tax rate to fund growth initiatives as well as to contribute $5B to its pension plan (always a big cost item for defense primes), which is improving earnings longer-term. Our price target is increasing to $374 as the F-35 deliveries gets closer to its target of 160/year. Continue reading “LMT 4Q17 earnings results are in line, 2018 initial guidance shows positive impact from tax reform”
Sanofi announced this morning the acquisition of Ablynx:
• Ablynx is a Belgian antibody biotech company that has multiple compounds in the works:
o Compound targeting a rare blood disorder (aTTP) that has completed phase III testing and pending European & US regulatory approval for commercialization (fit with rare disease & Bioverativ)
o compound to treat RSV infections in phase II (fits with Sanofi’s vaccine portfolio)
o early stage antibody technology platform (adding to Sanofi’s R&D efforts)
• Close of the 3.9B euros ($4.8B) all cash acquisition of Ablynx expected fairly soon, in 2Q18
• The deal will be financed by bank credit and was approved by both boards
• Deal neutral to earnings in 2018 & 2019, then low-single-digits accretive thereafter
This is not changing our view of the stock, as any incremental future sales coming from those new drugs are offset by the cost of the deals near term. As a reminder, Sanofi was outbid by Pfizer on the Medivation deal, and by JNJ on Actelion. So far 2018 is starting to be a big M&A year for Sanofi
