Market Monitor: Phil Blancato Picks

The CEO of Ladenburg Thalmann Asset Management, Phil Blancato, gives us his stock picks that he believes will keep your portfolio safe in this volatile market.

Investment ideas:

  • JPMorgan Ultra-Short Income ETF (JPST)
    • Invests in diversified portfolio of short-term, U.S. dollar-denominated investment-grade fixed and floating-rate corporate and structured debt while actively managing credit and duration exposure.
    • 30-day SEC yield of 2.81% with a duration of 0.51 years and competitively priced at 18bps.
    • Captures 97% of the yield of Bloomberg Barclays Aggregate Bond Index with only 8% of the duration.
    • In a flat to inverted yield curve environment, you are not being compensated to take on interest rate risk in the form of duration- you can use this ETF to play the short end of the curve and still collect an attractive yield. Provides a way to “be paid to wait” while equity and fixed income markets face headline volatility.
  • Costco (COST)
    • Costco Whole Sale Corp operates wholesales membership warehouses in multiple countries. The company sells all kinds of food, auto supplies, toys, hardware, sporting goods, jewelry, electronics, apparel, health and beauty aids as well as other goods.
    • Costco released its Q3 fiscal 2019 financial results after the closing bell today (Thursday). Earnings beat $2.05 EPS vs $1.82 estimated while sales slightly missed $34.74BN sales vs $34.76BN estimated.
      • in their previous quarters report, the company only slightly missed on sales ($35.3B vs. estimated $35.6) but significantly beat on earnings ($2.01 vs estimated $1.69 EPS).
    • In an April 26 press release, Costco announced a 14% hike to its dividend. Highlighting Costco’s consistent dividend growth in recent years, this 14% raise is in line with the company’s dividend increase last year and its average annual increase over the past five years. Alongside its dividend increase, Costco’s board of directors reauthorized a $4 billion stock repurchase program. Set to expire in April 2023, the program replaces the previous $4 billion program, which expired in April of this year.
    • Valuation: 31X P/E versus 10 year average P/E of 26X.
    • Performance YTD (as of 5/29): +18.79%
    • LTAM opinion: although the stock has done well so far this year and valuations may be higher than long term averages there is a defensive aspect to this company which we like. It has covered its dividend consistently in the past and it is a consumer staples company so should fare better than some riskier names out there today in the event of an economic downturn.
  • Walmart (WMT)
    • Walmart Inc. operates discount stores, supercenters, and neighborhood markets.
    • Walmart announced its financial results on 5/16:
      • Walmart slightly missed on sales in their last report ($123.9B vs. estimated $124.9B) but significantly beat on earnings ($1.13 vs estimated $1.02 EPS). Walmart has been pouring money into new technology that helps it fulfill online orders faster, grow its massive grocery business, stock shelves with merchandise and even train its employees. Competing with Amazon online, Walmart just this week announced it is starting to roll out next-day delivery across the country for more than 200,000 items, though it didn’t disclose exactly how much money it will be spending to do that. That was after Amazon said on April 25 it will be making free, one-day shipping a new perk for Prime members. “We’re continuing our transformation to become more of a digital enterprise,” Walmart CEO Doug McMillon said Thursday in a statement.
    • Valuation: 20X P/E versus 10 year average P/E of 15X.
    • Performance YTD (as of 5/29): +10.81%
    • LTAM opinion: although the stock has done well so far this year and valuations may be higher than long term averages there is a defensive aspect to this company which we like. It is a consumer staples company so should fare better than some riskier names out there today in the event of an economic downturn and also posted strong financial results recently.

Disclosures: Blancato owns JPST, COST & WMT for his clients

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