Description: Portfolio Managers Rich Erwin and David Yepez write up on themes for the SELECT Strategy investments.

SELECT Strategy Investment Themes in 2017 and 2018

Rich Erwin and David Yepez, SELECT Strategy Portfolio Managers

January 2018

 

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.

 

 

Sources:

 

1smartmail.phase2online.com/t/r-48AC708E547D53082540EF23F30FEDED

2smartmail.phase2online.com/t/r-BD51F2EC9D6AEC762540EF23F30FEDED

3finance.yahoo.com/quote/GOOG/

4finance.yahoo.com/quote/AAPL/

5finance.yahoo.com/quote/FB/

6finance.yahoo.com/quote/MSFT/

7investopedia.com/terms/a/artificial-intelligence-ai.asp

8fortune.com/2016/06/15/future-of-work-2/

9investopedia.com/terms/c/consumer_cyclicals.asp

10chicagotribune.com/business/ct-us-household-wealth-20170608-story.html

11bloomberg.com/news/articles/2017-10-31/u-s-consumer-confidence-index-rises-to-highest-level-since-2000

12thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968

13finance.yahoo.com/quote/BC/

14finance.yahoo.com/quote/PII/

15finance.yahoo.com/quote/DIS/

16finance.yahoo.com/quote/txrh?ltr=1

17finance.yahoo.com/quote/SBUX/

18finance.yahoo.com/quote/NKE/

19bloomberg.com/research/sectorandindustry/sectors/sectordetail.asp?region=US

20oilprice.com/

21data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

22eia.gov/dnav/pet/PET_STOC_WSTK_DCU_NUS_W.htm

23finance.yahoo.com/quote/EOG/

24finance.yahoo.com/quote/PXD/

25finance.yahoo.com/quote/SLB/

 

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

Compliance@ExencialWealth.com

 

Information and opinions provided herein reflect the views of the author as of the publication date of this article. Such views and opinions are subject to change at any point and without notice. Some of the information provided herein was obtained from third- party sources believed to be reliable but such information is not guaranteed to be accurate. In addition, the links provided within are for convenience only and the provision of the links does not imply any sponsorship, endorsement, or approval of any of the

content. We do not guarantee the content or its accuracy and completeness.

 

The content is being provided for informational purposes only, and nothing within is, or is intended to constitute, investment, tax, or legal advice or a recommendation to buy or sell any types of securities or investments. The author has not taken into account the investment objectives, financial situation, or particular needs of any individual investor. Any forward-looking statements or forecasts are based on assumptions only, and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Any assumptions and projections displayed are estimates, hypothetical in nature, and meant to serve solely as a guideline. No investment decision should be made based solely on any information provided herein and the author is not responsible for the consequences of any decisions or actions taken as a result of information provided in this book.


 

 

There is a risk of loss from an investment in securities, including the risk of total loss of principal, which an investor will need to be prepared to bear. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance.

Exencial Wealth Advisors, LLC (“EWA”) is an investment adviser registered with the Securities & Exchange Commission

(SEC). However, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. EWA may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements.

 

Complete information about our services and fees is contained in our Form ADV Part 2A (Disclosure Brochure), a copy of which can be obtained at www.adviserinfo.sec.gov or by calling us at 405-478-1971.


About the author

4054781971

RErwin@exencialwealth.com

Oklahoma City, Ok

Sr. Analyst/Portfolio Manager

Rich Erwin founded IAM, the first investment advisory firm in Plano, Texas. He served as its President and Chief Investment Officer until merging with Exencial. Rich earned a B.A. from Principia C... CLICK HERE TO READ MORE