Guest: Kenny Polcari, ButcherJoseph Asset Management
Polcari’s market outlook:
Robust jobs market, wages are rising, consumer debt is low and there will be first half benefit from TCJA (effective elimination of AMT and increase in child deduction) as well as lower interest rates all increasing cash in the consumer’s pocket. While consumer confidence has come off the highs it is still near historical highs.
Polcari’s stock picks:
Here are three stocks that we own that fit with our view that the market might shift to favoring less cyclical exposure. That being said we still like energy and consumer discretionary/media but need to be selective. The large dividends on the energy multinationals should cushion and we believe the U.S. consumer is far from dead. But healthcare is a also interesting to be a little less cyclical.
Home Depot (HD): Home Depot and LOW -Lowes – These names are still attractive – (but we really like HD as LOW has already moved nicely) and while the stock did sell off when we saw a spike in interest rates – we think that was an over-reaction and now that the FED has gone dovish – it is rallying nicely. And I think as we move into the spring home sale selling season – DIY work and upgrades will benefit both of these names….I for one can attest to that as I just did some work on my home and sold it two weeks ago. HD just rallied back up and thru long term resistance and appears to be holding nicely…..If it can break above the Feb highs of $192 ish….then a run to the low 2’s is in order.
McDonald’s (MCD): Recent purchase of Israeli digital marketing company—biggest acquisition in decades– shows that MCD is serious about technology as a competitive edge. They are rapidly adding kiosks in-store and expanding delivery. They have an app that allows you to order and pick up curbside, in the store or at the window – as they look to embrace new technology to help it to grow its business. Valuation is still relatively attractive and the stock sports a 2.5% yield.
Walmart (WMT): Walmart – attractive from a price point of view, is building a nice base in the $97/$100 range. This name will do well in a slowing economy as well as a growing economy. Their sheer size let’s them compete with AMZN and their Urban focused – member only JetBlack concierge service has allowed them to create a whole new concept that enables frazzled consumers more efficient ways to shop for themselves and their families to get exactly what they need through a text message to a personal shopper that sources from Walmart, Jet.com and also local specialty retailers. The stock is up nearly 7% ytd and looks as if it is just about to break out of the $97.50 allowing it some room to run.