GPM Top-Ten Stock Holding, Stryker Corporation named one of Fortune Magazine's 100 Best Companies to Work For for eighth consecutive year

GPM top-ten holding, Stryker Corporation (SYK) has been named one of Fortune's 2018 100 Best Companies to Work For in its annual survey and evaluation of top-rated workplaces in the United States. The list recognizes companies that have exceptional workplace cultures. This is the eighth consecutive year Stryker has been named to the list, and the company was ranked #16 out of 100. 

Fortune said, "Employees at the medical device company rave about their “dedicated” colleagues and the “important and meaningful” work. Stryker encourages them to see the “amazing” impact of their jobs with opportunities to observe surgeries, speak to patients and doctors and participate in hands-on procedures with cadavers and anatomical models."

Read the press release here.

Read the Great Place to Work review here.

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GPM Investing Insight: The Global Rally in 2017

From a quick view of the financial section in the news, one can see the rally in U.S. stocks in 2017: the S&P 500 up 20% year-to-date (YTD), led by Technology (+36%), and the Dow Jones Industrial Average over 24,750 after starting the year below 20,000. However, this is just a slice of a major global rally occurring.

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To begin with, according to Jeffrey Kleintop at Schwab, the global stock market (measured by the MSCI AC World Index) is up every month in 2017, marking the first time in the 30-year history of the index. Poland (PLND) is the biggest gainer of the year, up 55%. Qatar (QAT) is the only country in the red, down 13%. The Organization for Economic Cooperation and Development (OECD) tracks the world's 45 largest economies, and its latest report shows each economy is growing in 2017 and is predicted to continue growing into 2018. This would be the first occurrence of two straight years of growth since 2006 and 2007. 

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How are these stock market gains happening given the amount of negativity and worry portrayed in the news every day? South Korea (EWY), for example, is up 45% YTD as tensions with North Korea dominate headlines. This is possible because there are real companies that are growing strongly in these countries around the world. For South Korea specifically: Samsung (+43%), SK Hynix (+71%), KB Financial (+48%), and POSCO (+31%). 

In the United States, amidst the political tension and negative events, there is Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), and Google (GOOGL) leading the way, all up between 36% to 58%. Not only are the companies' stock values up significantly, the business growth backs it up, with all five producing solid GAAP (Generally Accepted Accounting Principles) earnings and providing jobs to hundreds of thousands of workers. The S&P 500 finished up every month in 2017 for the first time in stock market history. The index is up 21 out of the last 24 months.

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Concluding, one needs to put in perspective the growth seen, and further growth expected, worldwide to understand why stock prices and volatility are where they are today. Sometimes it can be difficult for one to look past news headlines and understand the underlying data that drives stocks. GPM remains focused on its Investment Process and Stock Selection Criteria, which includes selecting growing, high-ROE companies that we think trade at a reasonable price. Visit our new About Us pages to see how we can help you and Contact Us today.  

GPM Investing Insight: New Highs

With major stock market indicies recently reaching all-time highs, one may believe that stocks are overly expensive or the next crash is about to happen. Every day, there are articles written warning of a stock market bubble, or a financial pundit declaring the market is about to drop. However, new all-time highs are common, while market crashes rarely occur. According to Bloomberg, over the last 100 years, there has been an average of 12 new highs per year in the Dow Jones Industrial Average (DJIA). The average investor will see almost 500 new highs in their lifetime. 

Going back to 1915, the average total 1-year return for the DJIA following a new high is 8.9%, with positive returns 70.6% of the time, while the average total 3-year return is 21.0%. In fact, the stock market spends about 7% of its time at a new high since 1950. If one has a long-term time horizon, trying to time tops can be hazardous to performance, with hindsight being the only way to truly tell of a market peak. 

Throughout market cycles, GPM remains focused on selecting growing, high-ROE companies that we think trade at a reasonable price. We believe these companies have a high probability of delivering rewarding long-term growth in revenue, earnings, dividends, and ultimately, stock prices. We invest in businesses that are built to adapt and thrive, which gives us confidence to ride out market pullbacks and economic soft patches. 

You can reach out to GPM to talk about your investments through our Contact page

GPM Investing Insight: Earnings Season

Earnings season officially kicked-off this week as it does shortly after the end of every quarter. It is a busy time when the vast majority of the nation's public corporations report their quarterly sales and earnings.   

During every earnings season, the GPM research team carefully evaluates results for the 25-30 companies we currently own - each requiring a few hours of time. We read the press releases and supplemental reports, participate in management/analyst conference calls, and reconsider the overall execution and positioning of the various companies. We do the same for another 100+ stocks, including those on our focus list and others to gain valuable insight into specific businesses and corporate America.

As usual, this season opened with reports from a few industrials like Fastenal (FAST) and Delta (DAL), followed by major banks like Citigroup (C), JP Morgan (JPM), and Wells Fargo (WFC). For the next three weeks, the pace quickens dramatically, with most of the S&P 500 companies across all sectors reporting. More than a thousand others report along the way.

Quarterly reports are very closely analyzed and can move a company's stock in a major way. For example, a company like Microsoft (MSFT) has many analysts following the company and these analysts try to model what revenue, earnings per share (EPS), and other metrics will be each quarter. For Q1, MSFT will issue a press release after the market closes April 27th, which will contain key highlights and details of results, with an income statement, balance sheet, and other tables included. Analysts closely dissect these numbers to determine trends and update their models. 

Following the press release, Microsoft's management team, including CEO Nadella and CFO Hood, host an hour-long conference call providing more insight into the numbers, as well as answer questions from analysts. Management often sets revenue and earnings guidance for the next quarter and/or the full year on the call. This is very important because investors pay for a stock based on expected future earnings and cash flow. Guidance can have a bigger impact on short-term stock price performance than the initial quarterly results. If guidance is below what analysts are modeling, the stock could go down, while guidance that is in-line with or higher than expectations can drive the stock higher.

According to FactSet, for the first quarter of 2017 (Q1 '17), the S&P 500 is expected to report earnings growth of 8.9%, with a double-digit growth number likely, given that companies report actual earnings above estimates on average. This would be the highest growth rate since Q3 '14, when the rate was +8.1%. 

Clearly, earnings are like a company's report card. We spend a great deal of time every quarter grading the reports for our owned companies and others.  It is one aspect of managing stock portfolios that we enjoy greatly.

GPM Weekly Snapshot

Stocks gave up ground in a meaningful way for the first time this year, with the S&P 500 lower by 1.4% to 2,344. Small caps lagged as the Russell 2000 fell 2.65% to 1,355. Bonds were higher, pushing the ten-year treasury yield down to 2.4%. The US Dollar Index fell to 99.44 and a barrel of crude oil declined 2.7% to $47.97. 

Q1 2017 earnings growth rate for S&P 500 companies now stands at +9.1%, the highest rate since Q4 2011, when earnings grew +11.6%. Nike (NKE) and FedEx (FDX) were among the companies that reported results last week. NKE beat analysts' EPS estimates, but disappointing futures order growth, especially in North America, soured the results for investors. FDX missed quarterly estimates by a wide margin, but a strong outlook from management boosted shares on the day of the report. 

Starbucks (SBUX) held its final Annual Meeting with Howard Schultz as CEO. Incoming CEO Kevin Johnson outlined the growth agenda that he believes will drive the next wave of profitable growth for the company. SBUX plans to invest in coffee, tea, food, digital, China, and partner investments, along with creating 240,000 new jobs globally. IBM (IBM) hosted its cloud conference during week, highlighting three main points regarding its edge in the cloud: enterprise strong, data-first architecture, and cognitive at the core (Watson). Cloud currently accounts for 17% of IBM's total revenue.

Next week, investors will view data related to GDP, pending home sales, and consumer sentiment. 

GPM Weekly Snapshot

Stocks saw a modest sell-off last week, with the S&P 500 down 0.44% to 2,372, the first down week since mid-January. Small-caps fared worse as the Russell 2000 was off 2.07% to 1,365. Crude Oil suffered a 9.08% drop to $48.49/barrel. 

As of March 10, earnings season is nearly complete, with 99% of the companies in the S&P 500 reporting actual results for Q4 2016. Of these companies, 65% beat mean EPS estimates and 53% beat sales estimates, according to Fact Set Research. With earnings growth at 4.9%, the fourth quarter will be the first time the S&P 500 index has seen y/y growth in earnings for two consecutive quarters since Q4 2014 and Q1 2015. 

The employment situation was the big US economic data release last week. Nonfarm payrolls grew 235,000 vs. expectations of 200,000, locking in next week's FOMC rate hike. The market is pricing in a 100% chance of the hike occurring. January saw an upward revision of +11,000 to 238,000. Dropping 0.1%, the unemployment rate was 4.7%. 

In company specific news, Alphabet (GOOGL) and Starbucks (SBUX) held presentations. For GOOGL, it was the Google Next event, where management discussed new developments and partnerships in Google's Cloud division. The company announced partnerships with Verizon, eBay, and Colgate-Palmolive to run services on the cloud. At SBUX's conference presentation, management acknowledged the issues that the company is currently facing, including the slowdown in the restaurant-away-from-home category, difficult y/y growth comparisons, and mobile ordering difficulties. The company is disappointed in its performance and urgently attempting to fix the problems.

Next week, the Fed's interest rate decision will be the focus. In addition, investors will look at releases of CPI and Retail Sales data.  

GPM Weekly Snapshot

Stocks finished modestly higher for the week, with the S&P 500 closing +0.67% to 2,383 for a sixth straight week of gains, and the Dow Jones Industrial Average +0.88% to 21,005. The Ten-year treasury yield jumped to 2.49%, pushing bond prices lower. 

US economic data remains positive and supportive with GDP, Consumer Confidence, Personal Income & Outlays, and ISM Manufacturing all released during the week. To begin with, fourth quarter GDP showed little change, remaining at 1.9% annualized growth, but consumer spending got a solid upgrade to 3.0% rate.

Increasing to a new cycle high of 114.8, Consumer Confidence easily topped consensus estimates. Personal Income & Outlays data showed inflation up sharply to 1.9%, very near the Fed's 2% target. Lastly, ISM Manufacturing jumped to 57.7 in February, the strongest rate of monthly growth since August 2014. Respondents to the survey commented, “business is improving”, “very positive outlook for this quarter”, and “demand continues to be solid”.

There were mixed earnings from US companies, including disappointments from Target (TGT) and Costco (COST), while Dycom (DY), Donaldson (DCI), and Broadcom (AVGO) topped estimates and provided bullish forecasts. As of March 1, 484 companies from the S&P 500 reported results and total earnings for these 484 index members are up +7.4% on +4.9% higher revenues, with 68.4% beating EPS estimates and 54.1% coming ahead of top-line expectations., according to Zacks Research.

Finally, in tech, Snap held its initial public offering on Thursday, nearing a $40 billion valuation during trade on Friday. This was the biggest tech IPO since Alibaba in 2014. Next week investors will look for the jobs report on Friday. 

GPM Weekly Snapshot

Stocks moved higher for a fifth straight week, with the S&P 500 closing +0.69% to 2,367. The Dow Jones Industrial Average was up 1.0% to a 20,821, and is now on eleven consecutive up days. Back down to 2.31%, the Ten-year treasury yield is at the same level that it began the month of February. 

US Economic data included Flash PMI showing slowing, but still solid, conditions for the month of February, falling slightly to 54.3. Respondents reported strength in domestic orders and slower pace for exports. Existing Home Sales increased 3.3% in January to a rate of 5.69 million, well above the consensus estimate of 5.58 million. On Wednesday, the Fed minutes showed that many participants believe it is appropriate to raise the federal funds target again "fairly soon" if incoming information on the labor market and inflation are in-line or better than expected. 

Nordson (NDSN), Home Depot (HD), Wal-Mart (WMT), Cracker Barrel (CBRL), and State National (SNC) are among the companies that beat analysts' earnings estimates. CBRL reported its eleventh consecutive quarter of positive comparable restaurant sales growth and margin growth driven by favorable commodity prices and successful cost reduction programs. SNC saw a significant earnings increase y/y as a result of strong growth in Lender and Programs Services segments. Management was confident in the business and environment and raised its outlook for 2017. 

Overall, as of Feb. 24th, with 92% of the companies in the S&P 500 reporting results for Q4 2016, 66% of companies have beat the mean EPS estimate and 52% of companies have beat the mean sales estimate, according to FactSet. The earnings growth rate for the S&P 500 is 4.9%. The fourth quarter will be the first time the index has seen y/y growth in earnings for two consecutive quarters since Q4 2014 and Q1 2015.

Next week, investors will look at a wide array of economic data, from Durable Goods Orders, GDP, and Retail Store Sales. 

GPM Weekly Snapshot

Stocks saw a fourth week in a row of solid buying, with the S&P 500 up 1.5% to 2,351 and the Dow Jones Industrial Average higher by 1.75% to 20,624. Cisco (CSCO), Pfizer (PFE), and Boeing (BA) led the gains for the Dow, while Mallinckrodt (MNK), Stericycle (SRCL), and Cerner (CERN) were the largest gainers on the S&P 500.

The highlight of the week was the strong, encouraging economic data. Producer price index (PPI) indicated that underlying inflation pressure may be building, with the index coming in at a much higher-than-expected 0.6%. Consumer price index (CPI) rose 0.6%, the strongest reading in nearly four years. The headline y/y rate is well above the Fed's 2% target at 2.5%. In addition, the Philly Fed index reading 43.3 is the highest print since January 1984. This survey looks at general business conditions, asking a question regarding monthly sentiment. 

While US Earnings are growing nicely in the latest quarter, the earnings stagnation ended for European stocks. According to the WSJ, “European companies are posting their first rise in earnings for four years, giving local stocks a boost and promising further gains for markets.” On top of this, Cummins (CMI) is seeing increasing demand in China for its engines, “for the first time in a number of years, there are some early signs that point towards improvement in 2018.”

Finally, US earnings season continued, and as of February 15th, according to Zacks, 375 S&P 500 members have now reported results. Of these 375 reports, earnings are up +7.2% on revenues higher by +4.6%, with 68.8% beating EPS estimates and 54.4% coming ahead of top-line expectations. The earnings and sales growth rates are a solid improvement over previous quarters.

Looking forward to next week, PMI data and the Fed's meeting minutes will be in focus for investors. 

GPM Weekly Snapshot

Stocks had a strong week, as the S&P 500 rose 0.81% to 2,316, the Dow Jones Industrial Average increased 1% to 20,269, and the Nasdaq Composite was higher by 1.19% to 5,734. These are all-time highs across the board. Energy (XLE) was the only sector to decline, while Industrials (XLI) led the way with a 1.76% gain.

Church & Dwight (CHD), Dunkin Brands (DNKN), Gilead Sciences (GILD), NVIDIA (NVDA), and Panera Bread (PNRA) are among the companies to beat earnings estimates last week. CHD, the maker of Arm & Hammer products, beat on the top and bottom, while guiding future earnings within analyst's expectations. The company also raised its dividend 7% and acquired three brands during the quarter. Graphic processing unit (GPU) maker, NVDA, beat on revenue and earnings as well. NVDA's GPUs are used for deep learning, and are helping move self-driving cars, cancer detection, and weather prediction forward. 

Overall, according to Zacks, 319 S&P 500 members reported earnings for Q4, combining for 76.3% of the index's total market cap. Total earnings are up 5.8% on revenue that is 4.5% higher. Of these companies, 69.6% beat EPS estimates, while 54.5% came ahead of top-line estimates. This accelerating growth compares to +2.8% EPS growth and +2.0% revenue growth in Q3.

In the technology sector, Snap, Inc., the maker of the Snapchat app, filed its S-1 form to provide public information about the company ahead of its IPO. This is the most anticipated IPO in the tech space since Alibaba (BABA) in late 2014. Snap reported a loss of about $500 million in 2016.

Next week, investors will focus on inflation, retail sales, and housing data.