Description: Portfolio Managers Rich Erwin and David Yepez write up on themes for the SELECT Strategy investments.
Rich Erwin and David Yepez, SELECT Strategy Portfolio Managers
Exencial’s SELECT equity strategy focuses on corporations that meet our quality standards. Companies chosen include large, medium and small organizations with successful strategies that benefit key constituencies – customers, shareholders, employees and communities. They must demonstrate leadership and the ability to generate industry-leading
profitability, market share and growth. Finally, we attempt to purchase shares at a reasonable price.
Key themes presented by our investment team during Exencial’s semi-annual webcasts in January1 and July2 2017 included the rapid development of cloud computing and the increasing dominance of large companies. We cited these factors as reasons for owning SELECT companies such as Alphabet (GOOGL) 3, Apple (AAPL) 4, Facebook (FB) 5 and Microsoft (MSFT) 6.
As we move forward into 2018, our initial focus for the SELECT portfolio is on industries and sectors that hold promise for increased product demand and profitability.
Artificial intelligence (AI) 7 is the equivalent of what cloud computing was last year. The scope of AI8 expands across different industries including health care, transportation, manufacturing, customer service, retail and others. AI is expected to generate substantial social and economic value by transforming everyday life for the better. Alphabet (GOOGL) and Microsoft (MSFT) are key providers in this field, while forward-looking companies in various industries are utilizing it.
Consumer cyclical companies9 that generate a positive experience appear well-positioned to benefit from a strong economic backdrop. In the U.S., national net worth has reached record levels10, consumer confidence is near a multi-year high11 and income tax rates are likely to decline12. Combined, this has the potential to boost consumer spending. We believe SELECT companies in boating (Brunswick Corporation – BC13), off-road vehicles (Polaris Industries – PII14), blockbuster movie production and theme parks (Walt Disney – DIS15), quality/value dining and beverages (Texas Roadhouse – TXRH16 and Starbucks – SBUX17) and fitness apparel/footwear (Nike – NKE18) should thrive.
Although the energy sector has lagged the market for the past decade19, we are beginning to see some positive developments on the horizon. For instance, energy companies have reported solid operating improvements this year, supported by higher oil prices20. Global gross domestic product (GDP) 21 is surprising on the upside and crude inventory levels22 are steadily declining. Our investment team sees recovery potential in the energy sector next year and particularly favors EOG Resources (EOG) 23, Pioneer Natural Resources (PXD) 24 and Schlumberger (SLB) 25.
For more insights from our Chief Investment Officer, Tim Courtney, and our investment analysts, tune in to our upcoming client webcasts in 2018. We will follow up shortly with the date of the first one in January.
A complete list of portfolio holdings and specific securities transactions for the preceding 12
months is available upon request. Holdings are subject to change. Exencial Wealth Advisors or one or more of its officers, may have a position in the securities discussed herein and may purchase or
sell such securities from time to time.
Past performance is not indicative of future results. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities listed above. The performance information shown above has been calculated using a representative client account managed by the firm in Exencial’s SELECT Equity strategy. Information on the methodology used to calculate the performance information
and a list reflecting the contribution of all the holdings in the representative account to the
account's overall performance during the time period reflected above, is available upon request by sending an email to
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