CWS Market Review – December 31, 2017

The 2017 trading year has come to a close. Overall, this was a very good year for the stock market. Plus, it was one of the least-volatile years on record.

For the year, the S&P 500 gained 19.42%. Including dividends, the S&P 500 gained 21.83%.

Our Buy List had another good year. For 2017, we gained 20.58%. Including dividends, we were up 21.79%.

That’s right—we lost to the market by 0.04%. In simpler terms, that’s one penny over the course of a year for every $25 invested.

I’m very competitive, so I hate losing at anything, even by such a small amount. In my defense, this was an unusual year for stocks. That’s because a small group of very large companies did well. Roughly 55% of the stocks in the S&P 500 failed to beat the index this year. I also think of how things would be different if Axalta had accepted the $37-per-share offer from Nippon Paint.

Still, our long-term track record is very good. Over the 12 years of the Buy List, our total compounded gain is 228.09% compared with 176.11% for the S&P 500.

The Final Number for 2017

With the Buy List, I always try to be as transparent as possible. The table below details the Buy List’s performance for 2017. I’ve listed each stock along with the number of shares and the starting and ending prices. For tracking purposes, I assume the Buy List is a $1 million portfolio that starts out equally divided among the 25 stocks.

Stock Shares 12/30/16 Beginning 12/29/17 Ending Profit/Loss
AFL 574.7126 $69.60 $40,000 $87.78 $50,448.27 26.12%
ADS 175.0547 $228.50 $40,000 $253.48 $44,372.87 10.93%
AXTA 1470.5882 $27.20 $40,000 $32.36 $47,588.23 18.97%
CERN 844.4163 $47.37 $40,000 $67.39 $56,905.21 42.26%
CNK 1042.7529 $38.36 $40,000 $34.82 $36,308.66 -9.23%
CBPX 1731.6017 $23.10 $40,000 $28.15 $48,744.59 21.86%
CTSH 713.9033 $56.03 $40,000 $71.02 $50,701.41 26.75%
BCR 178.0468 $224.66 $40,000 $331.24 $58,976.22 47.44%
DHR 513.8746 $77.84 $40,000 $92.82 $47,697.84 19.24%
ESRX 581.4799 $68.79 $40,000 $74.64 $43,401.66 8.50%
FISV 376.3643 $106.28 $40,000 $131.13 $49,352.65 23.38%
HEI 648.0881 $61.72 $40,000 $94.35 $61,147.11 52.87%
HRL 1149.0951 $34.81 $40,000 $36.39 $41,815.57 4.54%
INGR 320.1024 $124.96 $40,000 $139.80 $44,750.32 11.88%
ICE 708.9685 $56.42 $40,000 $70.56 $50,024.82 25.06%
MSFT 643.7078 $62.14 $40,000 $85.54 $55,062.77 37.66%
MCO 424.3131 $94.27 $40,000 $147.61 $62,632.86 56.58%
ROST 609.7561 $65.60 $40,000 $80.25 $48,932.93 22.33%
RPM 743.0801 $53.83 $40,000 $52.42 $38,952.26 -2.62%
SHW 148.8427 $268.74 $40,000 $410.04 $61,031.46 52.58%
SBNY 266.3116 $150.20 $40,000 $137.26 $36,553.93 -8.62%
SJM 312.3536 $128.06 $40,000 $124.24 $38,806.81 -2.98%
SNA 233.5494 $171.27 $40,000 $174.30 $40,707.66 1.77%
SYK 333.8619 $119.81 $40,000 $154.84 $51,695.18 29.24%
WAB 481.8116 $83.02 $40,000 $81.43 $39,233.92 -1.92%
Total $1,000,000 $1,205,845.20

Note that HEICO (HEI) split 5-for-4 on April 19.

The 2018 Buy List

Now let’s turn our attention to the new Buy List. Here are the 25 stocks for 2018:

AFLAC (AFL)
Alliance Data Systems (ADS)
Becton, Dickinson (BDX)
Carriage Services (CSV)
Cerner (CERN)
Check Point Software Technologies (CHKP)
Church & Dwight (CHD)
Continental Building Products (CBPX)
Cognizant Technology Solutions (CTSH)
Danaher (DHR)
FactSet Research Systems (FDS)
Fiserv (FISV)
Hormel Foods (HRL)
Ingredion (INGR)
Intercontinental Exchange (ICE)
Moody’s (MCO)
Ross Stores (ROST)
RPM International (RPM)
Sherwin-Williams (SHW)
Signature Bank (SBNY)
JM Smucker (SJM)
Snap-on (SNA)
Stryker (SYK)
Torchmark (TMK)
Wabtec (WAB)

The five new stocks are Carriage Services (CSV), Check Point Software Technologies (CHKP), Church & Dwight (CHD), FactSet Research Systems (FDS) and Torchmark (TMK). I’ll have more on those in a bit.

Also, thanks to the merger, Becton, Dickinson (BDX) will take the place of CR Bard. I’m starting out BDX with a Buy Below price of $228 per share.

The five sells are Axalta Coating Systems (AXTA), Cinemark Holdings (CNK), Express Scripts (ESRX), HEICO (HEI) and Microsoft (MSFT).

Here’s the new $1 million portfolio, now divided equally among 25 stocks. Below are all 25 positions with the number of shares for each and the closing price for 2017. Whenever I discuss how well the Buy List is doing, the list below is what I’m referring to. The Buy List is now locked and sealed, and I can’t make any changes for 12 months.

Company Ticker Price Shares Balance
AFLAC AFL $87.78 455.6847 $40,000.00
Alliance Data Systems ADS $253.48 157.8034 $40,000.00
Becton, Dickinson BDX $214.06 186.8635 $40,000.00
Carriage Services CSV $25.71 1,555.8149 $40,000.00
Cerner CERN $67.39 593.5599 $40,000.00
Check Point Software CHKP $103.62 386.0259 $40,000.00
Church & Dwight CHD $50.17 797.2892 $40,000.00
Cognizant Technology Solutions CTSH $71.02 563.2216 $40,000.00
Continental Building Products CBPX $28.15 1,420.9591 $40,000.00
Danaher DHR $92.82 430.9416 $40,000.00
FactSet Research Systems FDS $192.76 207.5119 $40,000.00
Fiserv FISV $131.13 305.0408 $40,000.00
Hormel Foods HRL $36.39 1,099.2031 $40,000.00
Ingredion INGR $139.80 286.1230 $40,000.00
Intercontinental Exchange ICE $70.56 566.8934 $40,000.00
JM Smucker SJM $124.24 321.9575 $40,000.00
Moody’s MCO $147.61 270.9844 $40,000.00
Ross Stores ROST $80.25 498.4424 $40,000.00
RPM International RPM $52.42 763.0675 $40,000.00
Sherwin-Williams SHW $410.04 97.5515 $40,000.00
Signature Bank SBNY $137.26 291.4177 $40,000.00
Snap-on SNA $174.30 229.4894 $40,000.00
Stryker SYK $154.84 258.3312 $40,000.00
Torchmark TMK $90.71 440.9657 $40,000.00
Wabtec WAB $81.43 491.2195 $40,000.00
Total $1,000,000.00

Danaher is now the largest stock with a market cap of $65 billion. The Buy List is largely large- and mid-cap stocks. Only two are smaller than $7 billion. Continental Building Products (CBPX) is about $1 billion, and Carriage Services (CSV) is $410 million.

Only AFLAC and Fiserv have been on the Buy List all 12 years. This is Stryker’s 11th year. FactSet is returning for the third time to the Buy List.

Our Five New Members

Here’s a brief look at our five new stocks plus their starting Buy Below prices. I’ll have more to say on each stock in upcoming issues.

Carriage Services (CSV) is one of those stocks that I’m sure has you thinking, “Poor Eddy has lost his mind.” Carriage is a funeral-home operator based in Texas. The company is also far smaller than most of the other companies on the Buy List. Still, it’s good to have a below-the-radar company in your portfolio. Barely anyone follows Carriage, but the numbers look good. I’m giving Carriage a Buy Below price of $28 per share.

Check Point Software Technologies (CHKP) is an Israeli-based computer-security firm. It’s not cheap at 19.7 times this year’s earnings, but I think that’s not a bad price considering their growth. Buy up to $111 per share.

Church & Dwight (CHD) is a company I’ve wanted to add for many years. They’re a very strong number in consumer staples. They own several well-known brands like Arm & Hammer, OxiClean and, of course, Trojan. Church & Dwight is a buy up to $54 per share.

FactSet Research Systems (FDS) is a financial-data and software company. They help provide all the numbers that investors love to crunch. The stock was previously on the Buy List from 2006 to 2009 and again in 2013. I probably should have had them on the whole time. I’m starting FactSet as a buy up to $202 per share.

Torchmark (TMK) is a stock I’ve wanted to add to the Buy List for years. This is a very well-run insurance company based in Texas. The company almost always grows its operating income by 7% to 10% per share each year. Buy below $97 per share.

One last item. RPM International (RPM) will release its fiscal Q2 earnings on Thursday, January 4. The consensus on Wall Street is for earnings of 59 cents per share. That’s up from 52 cents the year before.

That’s all for now. The new trading year begins bright and early on Tuesday morning. We’ll get some of the key turn-of-the-month econ reports. ISM comes out on Tuesday. The ADP payroll report is on Thursday. Then the big jobs report comes out next Friday. Be sure to keep checking the blog for daily updates. I want to wish everyone a happy, healthy and profitable New Year. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Posted by on December 31st, 2017 at 11:40 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.