Category: Equity Earnings

Staying Invested

As a firm, we do our best to keep our clients invested over time. It is extremely difficult to time the markets, and very often some of the worst days, weeks, or months, are followed by the best return periods (or vice versa).

While I wouldn’t necessarily lead with this to clients, especially after the unease of a choppy year end, I want to point out that we just experienced a type of “bounce back” event. After experiencing the largest one month selloff since February 2009 (-9.0%) in December, the S&P 500 followed up with its highest returning January (+8.2%) since before I was born (30+ years).

That is not to say we expect markets to continue with this momentum. More to the point, it is a reminder that, by selling during periods of volatility, it is possible that investors can miss out on returns that are not easy to get back.

Another little side note, if we were to “extend” the 2018 calendar year one extra month (12/31/17 – 1/31/19), the S&P 500 is up 3.3%. I understand this isn’t the total return we have become accustomed to with U.S. equities, but it gives a sense that, if you didn’t react at all to the volatility of the last 13 months, your investment in the S&P has provided you with a positive total return.

Below is a chart of January Monthly Returns dating back to 1988:

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

Eaton Vance on 2019 Implications of Tax Cuts and Jobs Act

Attached is a piece put out by Eaton Vance that looks at the effects of the tax cuts enacted at the end of 2017 as it pertains to 2019. Specifically, it looks at what individuals and corporations filing their 2019 tax returns should be aware of.

[Category Market Themes}

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

Eaton Vance 2019 Tax Implications.pdf

Crown Castle International ($CCI.US) Q4 2018: Finishing off strong 2018

Crown Castle International Corp. (CCI) had another strong quarter, finishing off a successful 2018. While FFO was lower than expected by the market, site rental revenues came in higher than firm and street estimates. CCI slightly increased its 2019 estiamtes for site rental revenues and adjusted EBITDA, leaving AFFO estimates unchanged. Growth in the towers space continues to be driven by consumer demand for data which leads to investment by mobile carriers. Within the space, CCI is best positioned to take care of carrier needs across towers and small cell/fiber. CCI’s investment in small cells and fiber are performing better than expected and the company’s margins should continue to improve as they increase colocation on their newly developed small cells.

Current Price: $112 TTM Return: 2.2%

Target Price: $125 Position Size: 2%

Continue reading “Crown Castle International ($CCI.US) Q4 2018: Finishing off strong 2018”

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

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

Starting a 2% position in Constellation Brands (STZ) #researchtrades

We are recommending buying a 2% position in STZ (Constellation Brands), funding from cash.

Investment thesis:

· Adding STZ helps position our portfolio to be more defensive at this stage of the economic cycle

· STZ is down ~20% YTD, giving us a good entry point

· STZ continues to have HSD top line growth and high margins that should incrementally improve going forward

· STZ comes out of a heavy capex investment cycle to support its growth: FCF margins are set to inflect thanks to lower capex

Company description:

$35B market cap, $8B in sales, $1.2B in FCF

STZ owns the fastest growing beer portfolio in the US and is the #1 multi-category alcoholic beverages supplier in the US

The firm generates over 97% of its revenue in the U.S.

100 brands including:

v Imported beer: Corona, Modelo, Pacifico: owns the rights to distribute in the US

v Craft beer: Ballast Point

v Wine: Robert Mondavi, Black Box, Clos du Bois

v Spirits: Svedka

Julie S. Praline

Director, Equity Analyst

Direct: 617.226.0025

Fax: 617.523.8118

Crestwood Advisors

One Liberty Square

Suite 500

Boston, MA 02109

www.crestwoodadvisors.com

STZ presentation – CRESTWOOD.pptx