Quarterly Research Summary October 2019
Please refer to pages 20 - 26 of this report for detailed disclosure and certification information
It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list Wealth Management Research October 2019 2019 Market & Economic Outlook – October Update James D. Ragan, CFA, Director of Research, Wealth Management Originally published 10/10/19 Outlook Summary: U.S. equities have remained resilient since the S&P 500 index set a new all-time high in late-July, experiencing modest pull backs followed by reversals that have kept the index near highs and in a narrow range. As of 10/9/19, the S&P 500 was at 2,914, 3.7% below the 7/26/19 all- time high, and up 16.2% (excluding dividends) in 2019. Investors continue to navigate market headwinds including slowing U.S. GDP growth, flat corporate earnings, and weaker than expected growth in international markets. We connect each of these headwinds to trade uncertainty, as we believe that the U.S. trade dispute with China has negatively impacted both global GDP data and the outlook for earnings growth in the U.S. Since early 2019, our view has shifted from expecting a comprehensive permanent trade agreement to now looking for an interim or partial trade agreement that removes some tariff uncertainty but does not solve structural disagreements. We believe investors would react positively to an interim trade agreement, as it could improve earnings visibility due to the potential for renewed business investment and sustained consumer confidence. Progress on a trade deal remains elusive, however, creating uncertainty that weighs on our market outlook. Our fair value estimate for the S&P 500 is 3,010, unchanged from July, and represents a 3.1% gain from the index closing price on 10/9/19, and a 20% gain from 12/31/18. We believe that investors should remain committed to their long-term investment plans; identifying quality companies across sectors, and invest according to a well-defined portfolio objective.
Our 3,010 S&P 500 price target represents a P/E of 17.2x current next 12-month (NTM) FactSet consensus EPS estimate of $175.51. The index currently trades at 16.6x that estimate, which is above the average S&P 500 P/E of 15.7x since 2000(in a range of 10x to 27x). At year-end 2018, the S&P 500 P/E multiple was 14.5x, its lowest valuation in five years. Typically, we associate lower S&P 500 P/E ratios with a downturn in earnings and/or economic activity, and often a fear of rising interest rates that could put the brakes on growth. The earnings outlook has softened in 2019, with full-year estimated EPS growth for the S&P 500 of 2% (all in 4Q19), and we expect modest earnings growth to continue in 2020. Equity valuations have not been subject to higher interest rates, as U.S. Treasury bond yields have moved substantially lower in 2019. As of 10/7/19, the U.S. Treasury yield was 1.55%, compared to 2.00% on 6/30/19 and 2.68% on 12/31/18. We attribute three factors to the decline in long-term rates. The most concerning is that bond investors fear lower than expected GDP growth that could lead to necessary fed funds rate cuts. Also driving lower interest rates, however, is the absence of inflation, which in 2019 has trended well below the Fed’s 2.0% target; and extremely low global long-term interest rates, with the U.S. 10-year yield among the highest in global markets (creating foreign demand for U.S. treasury bonds). While we expect slowing U.S. GDP growth to 2.2% in 2019 (vs. 2.9% in 2018) and 1.8% in 2020, we do not see a recession forming. This could support modestly higher long-term interest rates next year, but at levels remaining well-below historical averages, which should be constructive for equity valuations. We believe that gains in equity markets will be tied to sustained earnings growth potential in the mid-single digit range of 4% to 6%.
US 10-Year Treasury Yield S&P 500 Next Twelve Months P/E 8% 28x Average
26x 7%
24x 6% 22x
20x 5%
18x 16.62x 4% 16x 15.73x 3.44% 14x 3% 12x 2% 10x 1.55% 8x 1% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Data source: FactSet as of 10/7/19 The S&P 500 gained 1.7% including dividends in 3Q19, as the June rally continued in July, driving new highs for the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite indices. After a mini sell-off in August, gains resumed in September, driving the S&P 500 higher. Small capitalization stocks did not recover from losses in August and the Russell 2000 small cap index ended 3Q19 down 2.4%. For 2019 year-to-date (YTD) through 9/30/19, investors enjoyed strong gains in most equity and fixed income asset classes. U.S. large cap stocks led the way, as the S&P 500 delivered a total return of 20.6%, while the Russell 2000 total return was 14.2%. Most non-U.S. equity markets posted gains as well; the MSCI Europe, Australasia, and Far East (EAFE) index posted a return of 16.2% and the MSCI Emerging Markets index gained 8.1%. Many fixed income investments also rallied, driving interest rates lower. The Barclays U.S. Aggregate Bond index posted a YTD total return of 8.5% through September.
Tariff and trade news caused most of the market volatility during 3Q19, seemingly more important to investors than evolving trends in U.S. consumer spending and business investment, and two interest rate reductions by the U.S. Federal Reserve Bank (Fed). Market gains in late-June into July were prompted by a “tariff truce” meeting between President Trump and China President Xi at the G7 Summit; August market declines followed an end to the truce, as President Trump announced scheduled new tariffs on $300 billion of China
1 Wealth Management Research October 2019 imports; and September market gains followed a delay in many of those tariffs to 12/15/19, and newly scheduled trade talks. While we acknowledge that news on trade negotiations are imprecise and often come in the form of a Presidential tweet, it is hard to deny that investors are watching developments closely. We believe that current equity market valuations are assuming positive developments in the China trade negotiations because it appears relatively clear that ongoing trade uncertainty has weighed on business and capital investment, and contributed to consumer confidence backing off from peak levels.
What worries us? We continue to monitor a pause in U.S. earnings growth, a slowdown in U.S. business investment, and weaker manufacturing outlooks in the U.S. and abroad. Each of these trends worsened in 3Q19 from 2Q19 and largely contributed to the Fed’s decision to cut short-term rates twice in the quarter. In our view, a more accommodative Fed can offset some of the headwinds created by trade war uncertainty, but that trade progress in the form of a de-escalation of tariffs or interim trade agreement is important to provide a potential catalyst for global business investment and a boost to GDP growth. We are less worried in the near-term regarding the political firestorm that is brewing in Washington D.C. as President Trump faces impeachment hearings led by the House of Representatives. Investors have largely dismissed this threat, primarily because the potential disruption caused by an ultimate impeachment appears unlikely at this point due to push back from the Senate. Similarly, we also believe it is too early to make economic and market predictions on next year’s presidential election as the democratic nominee and party platform remain highly uncertain. As we move through 2020, however, the election cycle will be of high importance to investors.
A Pause in U.S. Earnings Growth. S&P 500 quarterly earnings growth was flat year-over-year (Y/Y) in both 1Q19 and 2Q19 and is estimated to turn negative in 3Q19 for the first time in the last 13 quarters. Earnings growth has faced difficult comparisons in 2019 against very strong growth trends last year. Revenue, increased 5% and 4% in 1Q19 and 2Q19, respectively, but companies have faced rising cost pressures from inputs, tariffs and labor, in addition to a strong U.S. dollar, which hurts foreign earnings. These factors weighed on earnings growth to start the year, and likely will contribute a similar negative impact (revenue growth with flat to down earnings) in 3Q19 as results are reported throughout October. As of the end of September, the U.S. trade weighted dollar index was 4.4% higher Y/Y in Q3 and was 3.3% stronger since the end of 2018. We expect the dollar strength headwind to lessen as we approach 2020, although it did not weaken in Q3 as we expected in our mid-year outlook. Consensus earnings growth for full-year 2020 is 10.8% as of early October. This number appears aggressive to us, but we believe that earnings growth can resume in 4Q19 and through next year in the low single-digit range driven by modest sales growth, mitigation of rising costs, a more favorable U.S. dollar, and reduced shares outstanding from stock buybacks.
S&P 500 Earnings Growth (y/y, reported) 30% 25% 25% 26% 25% 20% 14% 15% 15% 13% 10% 9% 9% 9% 10% 6% 7% 5% 5% 3% 3% 5% 1% 0% 0% 0% -5% 0% -2% -3% -3% -4% -10% -7% *3Q19, 4Q19, 1Q20, and 2Q20 are FactSet consensus estimates as of 10/1/19 -15%
Data source: FactSet, D.A. Davidson & Co., as of 10/1/19
A Slowdown in U.S. Business Investment. Non-residential fixed investment is reported by the U.S. Department of Commerce in its quarterly GDP report. It measures investment by private businesses and other institutions in equipment, structures, and intellectual property, and comprises approximately 14% of GDP. We view this data as the best indicator of U.S. business investment trends. Business investment growth was on a steady growth trajectory since late-2016 through mid-2018. Quarterly Y/Y investment peaked in 2Q18, remained strong in 3Q18 and has trended substantially lower for the past three quarters. In fact, while Y/Y growth remained modestly positive, business investment was a slight drag on 2Q19 GDP growth as quarterly GDP growth is measured on a sequential change from the previous quarter on an annualized basis. Intellectual property investment has remained solidly positive over the past year with weakness driven by a decline in investment in equipment and structures. Several factors contribute to the weaker data, including a leveling off of oil and gas drilling investment following a multi-month increase; but we attribute a meaningful part of the slowdown to the China trade dispute and the investment delays caused by tariff uncertainty. In our view, a trade agreement with China would help to avoid a multi-quarter slowdown like we saw in 2015.
2 Wealth Management Research October 2019 Non-Residential Fixed Investment, SAAR (Y/Y% Growth) 15.0%
10.0%
5.0% 2Q19: 2.55% 0.0%
-5.0%
-10.0%
-15.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Data source: FactSet as of 6/30/19
Declining Manufacturing Data. The outlook for manufacturing activity (and also services) is updated through business executive surveys that identify trends in production schedules, purchased manufacturing materials, and staffing levels, etc. Two prominent companies, the Institute for Supply Management and IHS Markit, conduct monthly widely-followed surveys that are rolled into a purchasing managers index (PMI), and followed closely by economists. Both companies publish an index with a base of 50; a reading above 50 suggests that manufacturing activity is expanding, while below 50 reflects contraction. Global manufacturing PMIs among major U.S. trading partners (Eurozone, Japan, U.K. and China) peaked in late 2017, trended lower throughout 2018, and each fell below 50 (contraction) earlier this year. The U.S. PMIs, on the other hand, remained at very high levels (55 to 60) throughout 2018, signifying a healthy manufacturing outlook. But those high readings peaked in late 2018, and moved quickly lower in 2019, and the ISM Manufacturing PMI was below 50 in both August and September. The peak and steady decline of the U.S. manufacturing PMI over the past year coincides with increasingly negative trade rhetoric beginning in the middle of 2018, which has likely caused businesses to delay or scale back capital projects and adopt a more cautious forward looking view. Manufacturing comprises a relatively small portion of U.S. GDP (the service sector is several time larger), but is important for corporate earnings and investment that drives innovation and future economic growth potential. While we have watched the weaker manufacturing data closely we have commented that the services sector is healthy and continues to point to growth; but, in recent months the ISM non-manufacturing (Services) PMI dropped from the high 50s to low 50s, coming in at 52.6 in September, a 3-year low. We expect the services data to stabilize, as many services feed into consumer spending, and other measures of consumer health: employment trends, wage growth, and personal income, have remained strong. ISM U.S. PMI Data - Manufacturing and Services PMI Manufacturing Index - Seasonally Adjusted 62 62 Eurozone 60 Japan 60 United Kingdom China 58 58
56 56 54 54 52 52.60 51.38 52 50 48.93 50 48 48.32
48 46 ISM PMI - Manufacturing 47.80 45.70 ISM PMI - Non-Manufacturing (Services) 46 44 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2016 2017 2018 2019
Data source: FactSet as of 9/30/19
Since our July Market Outlook the Fed has implemented two rate cuts. The Federal Open Market Committee (FOMC) twice cut its fed funds overnight target interest rate by 25 basis points (bp), first on 7/31/19, and again on 9/18/19. The July cut was the first Fed rate decrease since December 2008. This was a stark reversal from 2018, when the Fed raised rates four times, and today the fed funds target range is 1.75% to 2.00% compared to 2.25% to 2.50% at the end of last year. Following the July rate cut, Fed Chair Jerome Powell held a press conference to discuss the Fed’s action and said that despite a favorable outlook for the U.S. economy the Fed was cutting its fed funds target “to insure against downside risks from weak global growth and trade policy uncertainty.” Following the September meeting, and additional rate cut, Mr. Powell again highlighted the “insurance” strategy as he indicated that the Fed’s goal is to keep the U.S. economy strong and provide insurance against “ongoing risks.” The Fed called out weakness in business investment, exports, and manufacturing output, attributing the malaise to slower growth abroad and trade policy developments. The Fed has clearly stated that it does not set economic policy, including trade policy, and will follow its mandate to foster stable prices (inflation) and strive for maximum employment. So, if trade uncertainty creates GDP growth headwinds, it is appropriate to use monetary policy (in this case lower interest rates) to potentially
3 Wealth Management Research October 2019 ease the negative impact of those headwinds. On the heels of the December 2018 Fed rate increase, investors correctly (in our view) worried the Fed was tightening at a time when the U.S. economy was slowing. Perhaps, at the time, the Fed misjudged the slowdown in business investment or prospects for flat earnings, but that has changed now, and the Fed is prepared to cut rates further if supported by additional weak economic data.
The Fed also updated its Summary of Economic Projections at its 9/18/19 meeting. Its 2019 GDP median GDP estimate increased to 2.2% from 2.1% and its 2020 estimate was unchanged at 2.0%. The core inflation target remained at 1.8% and 1.9% in 2019 and 2020, respectively, and the estimated year-end fed funds target was 1.9% for both 2019 and 2020. This suggests no more rate cuts in 2019 despite two more FOMC meetings (10/30/19 & 12/11/19), although the fed funds futures market is pricing in an 80% chance of a rate cut at the October meeting and a 35% chance of two more rate cuts by year-end. Given a two-year Treasury yield of 1.52% and a 1.75% (low end) fed funds target, we believe that bond investors believe the Fed should cut the overnight rate at least one more time. One more rate cut, along with an interim trade agreement, could provide improved economic visibility and lead to higher long-term rates. On 7/31/19, the 2-year Treasury yield of 1.87% compared to the 10-year yield of 2.02%. Today the 10-year yield is 1.66%. Even if long-term rates move higher, we do not expect a dramatic move higher, and Treasury rates remaining near historically low levels increases the relative attractiveness of high quality equities.
All Eyes on the U.S. Consumer. U.S. consumer spending has not only been the driver of 2019 U.S. GDP growth, but is also the bright spot in the global economy. Consumer spending is always important as it comprises 68% of U.S. GDP, but it is even more important this year as U.S. business investment has slowed, residential investment remains low, and global economies have weakened (to be sure, government expenditures have also contributed positively to GDP in 2019). Personal Consumption Expenditure (PCE) data is reported by the U.S. Department of Commerce in its quarterly GDP report (and updated monthly through the income and outlays data). It measures consumer expenditures on goods and services, including multiple line items helpful in identifying consumer spending trends. 2Q19 GDP data rebounded from weaker trends in 4Q18 and 1Q19, and made its strongest contribution to quarterly GDP growth since the fourth quarter of 2017. Several consumer categories have been strong in 2019, including household consumption, and both durable and nondurable goods. Monthly data revealed slowing growth in August compared to June and July, which could be attributed to trade concerns, but the monthly trends in 2019 through August were more consistent than in 2018, which was a strong year for consumer spending. U.S. Consumer Spending (PCE) - Quarterly Y/Y% 4.5%
4.0%
3.5%
3.0%
2.5% 2Q19: 2.64%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Data source: FactSet as of 6/30/19
The Department of Labor reported a 136,000 (K) net increase in nonfarm payroll employment in September and revised the August data to 168K from 130K previously reported. Over the past six months, the U.S. created a monthly average of 154K new jobs compared to 216K one year ago. Given the economy is near full-employment (the unemployment rate is just 3.5%), slowing monthly jobs gains is expected and should be more in-line with the monthly increase in the civilian labor force of an estimated 125K. Full employment should contribute to strong consumer confidence, bolstering consumer spending, which will also be tied to wage gains. Average hourly earnings grew 2.9% in September 2019 vs. 2018, which was the first time the Y/Y growth rate fell below 3.0% in 14 months. We believe Y/Y wage gains of 3.0% or higher are important to keep consumer spending on a strong trajectory.
Through 10/9/19, 10 of 11 S&P 500 sectors posted YTD gains, but since the end of July sector leadership has changed. The outperformance of the S&P 500 in 2019, and recovery from 4Q18 declines, has been broadly represented across multiple sectors, led by Technology, Real Estate (REITs), and Utilities. Only Energy posted a YTD decline, and all other sectors, except Health Care, posted double- digit returns (at least 10%) before dividends. Since the S&P 500 set an all-time high in late-July, the index has traded in a range below that level. From 7/31/19 to 10/9/19, only three sectors posted gains: Utilities, REITs, and Consumer Staples, while some of the early year leaders, representing growth stocks, Technology and Consumer Discretionary, lagged. We attribute several factors to the relative outperformance of these three sectors. First, Utilities, REITs, and Consumer Staples are more defensive, especially Utilities and Staples, as many constituents will be less exposed to slowing GDP growth. Second, S&P 500 Utilities (3.1%), REITS (3.1%), and Consumer Staples (2.8%) all have average dividend yields above the S&P 500’s current yield of 1.9%. Many investors have purchased dividend-paying equities as an
4 Wealth Management Research October 2019 alternative to plunging yields in fixed income securities. Third, they are a short-term earnings play, as 3Q19 S&P earnings are estimated to decline 4%, with just three of 11 sectors projected to generate Y/Y earnings growth. This includes 3Q19 projected growth for Utilities and REITs, and only a modest decline estimated for Consumer Staples. In our view, these two-plus months of outperformance might not be sustainable, as we continue to favor cyclical sectors over defensive ones. Our sector weight outlook is included later in this report.
S&P 500 Sector Performance: Since 7/31/19 & YTD through 10/9/19
35% 7/31/19 - 10/9/19 2019 YTD 30% 28.8% 26.3% 25% 21.3% 20% 19.5% 19.2% 19.1%
16.5% 16.2% 15% 13.4%
10.3% 10% 8.0%
4.8% 5% 2.1% 2.6%
0% -1.1% -1.7% -2.0% -2.2% -2.4% -2.6% -5% -3.9% -4.4% -4.4%
-10% -9.9%
-15% Utilities Real Estate Consumer Info S&P 500 Comm Consumer Health Care Industrials Financial Materials Energy Staples Technology Services Discretionary Data source: FactSet as of 10/9/19; price return excluding dividends
According to FactSet consensus, S&P 500 earnings are expected to decline 4% in 3Q19 with revenue growth of 3%. Results in 2Q19 reflected earnings that were flat (but better than down 3% expected) and revenue growth of 4% (as expected). In Q3, Y/Y earnings gains are expected from just three of the eleven S&P 500 sectors, led by Utilities (expected up 4%), REITs (up 3%), and Health Care (up 2%). The sectors with the largest expected earnings declines in Q3 are Energy (expected down 37%), Technology (down 10%), and Materials (down 9%). We advocate that long-term investors build portfolios of quality companies that are diversified broadly across sectors. Investors should monitor sector allocations relative to benchmarks and be aware of where sectors are overweight and underweight relative to their portfolio goals. Investors should look to rebalance positions based upon those goals, but rarely do we recommend being “all-in” or “all-out” of a sector. Our current 2019 sector allocation recommendations, versus the S&P 500 index weight, are discussed below. S&P 500 Sector Recommendations - October 2019 S&P 500 Weight WM Research GICS Sector by Market Cap 2019 Outlook Notes Change Technology 22.2% marketweight diversify across tech industries, top performing 2019 sector Health Care 13.7% marketweight political headwinds create underperformance, valuations attractive Financials 12.7% overweight gave back 2Q gains on Fed cuts, strong balance sheets, patience required Communications Services 10.4% marketweight be selective, some companies to face regulatory scrutiny Consumer Discretionary 10.2% marketweight consumer trends positive, but remain diversified beyond retailers Industrials 9.2% overweight attractive valuations, could extend rally on positive trade news Consumer Staples 7.7% underweight strong defensive appeal, global exposure limits upside, watch valuations Energy 4.4% marketweight global demand & geopolitical concerns, low expectations, look for quality was overweight Utilities 3.6% underweight strong defensive and domestic appeal, but sector is expensive was marketweight Real Estate (REITs) 3.3% marketweight low interest rates are here to stay and are a positive driver
Materials 2.7% marketweight vulnerable to global weakness, look for pricing power Data source: D.A. Davidson Wealth Management Research 10/10/19 (S&P 500 sector weights as of 10/9/19)
5 Wealth Management Research October 2019
Wealth Management Research Investment Cycle Gauge
Economic Indicator Earnings Indicator E quity Market Indicator (2019)
Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish
Changes from prior Indicator: Changes from prior Indicator: Changes from prior Indicator: modestly lower, as GDP trends track lower none, earnings growth to resume in 4Q19? no change to fair value estimate
Source data: D.A. Davidson & Co., as of 10/10/19
6 Wealth Management Research October 2019
Focus List Philosophy Quality Value Portfolio
The Focus List portfolio seeks long-term outperformance versus the S&P 500 through investment in stocks of quality companies trading at a discount to our estimate of fair value.
We identify quality companies by evaluating potential candidates for each of the following traits:
1) Industry Leadership: companies with durable competitive advantages and a track record of strong financial performance
2) Skilled Management: successful history of execution on near-term initiatives with a focus on enhancing shareholder value over the long-term
3) Resilient Profitability: ability to maintain or increase margins, revealing competitive advantages through pricing power, a lower cost structure, and/or scale
4) Balance Sheet Strength: provides stability and flexibility throughout the economic and industry business cycle
Those that meet criteria must also offer compelling risk/reward (value). We seek companies with discounted valuations relative to peers and/or the broad market, or those that trade at a reasonable price given our view of a strong competitive position or growth potential.
The Portfolio is constructed through equal-weighted investment in 18 to 22 stocks. We focus on large-cap companies, although mid-cap companies are considered, and we maintain diversity by business sector, while being flexible to overweight or underweight where we see opportunity.
We have a long-term investment horizon and seek a 3+ year holding period in each position. Stocks are removed from the Focus List if there is a detrimental or significant change in company or industry fundamentals, and/or if a stock exceeds our view of fair value.
7 Wealth Management Research October 2019
Quarterly Portfolio Letter Focus List Third Quarter 2019 Recap
Focus List Portfolio Total Return Since Inception (as of 9/30/19) YTD 3 Mo. 1-year 3-year 5-year 10-year Cumulative Annualized Focus List (Gross of Fees) 23.0% 4.0%4 3% 117.5% 3% 13.5%4 3% 7.3%7 6% 10.4%7 1% 279.7%11 6% 13.2% Focus List (Net of Fees)* 20.7% 3.4% 4.9% 10.7% 4.7% 7.8% 191.9% 10.5% S&P 500 20.6% 1.7% 4.3% 13.4% 10.8% 13.2% 313.5% 14.1% Sources: D.A. Davidson & Co., FactSet
The Focus List portfolio generated strong relative performance during each month of the third quarter. As global economic uncertainty increased and interest rates continued to decline during Q3, defensively positioned sectors (Utilities, REITs, and Consumer Staples) were the market’s best performers. This was a large hurdle to overcome as the Focus List portfolio is underweight each of these sectors (relative to the S&P 500 index); however, good stock selection offset the allocation impact. We seek sector diversification with the 21 positions currently in the portfolio, but we do not intend to necessarily align with the sector weightings of the S&P 500. Sector allocation impact will vary from quarter to quarter but, over time, we believe that the positive impact of stock selection, as we witnessed this quarter, will drive Focus List outperformance versus the broad market.
Health Care has been a standout sector for the Focus List in 2019, led by strong performance from medical technology company Stryker (SYK) and health services leader CVS Health (CVS). Performance from Amgen (AMGN), our lone pharmaceutical position, has been mixed since its addition to the Focus List in late 2018, but we continue to view it as an attractive opportunity for investors. In contrast to its large-cap biotechnology peers, AMGN’s portfolio of medicines is diversified, with seven products generating at least $1 billion in revenue during 2018, and the company exhibits leadership in six different therapeutic areas: heart health, cancer, bone health, neuroscience, kidney health, and inflammation. We believe this diversity is valuable and provides stability to AMGN’s financial results.
Soft near-term growth expectations have hampered AMGN shares recently, but the company received two pieces of good news on that front during the third quarter. In August, a federal judge ruled to uphold patent protection for AMGN’s largest drug, Enbrel (a treatment for autoimmune disease) from biosimilar competition through 2028. This ruling is likely to be appealed, but should secure Enbrel’s $4 billion+ annual revenue contribution to AMGN for at least the next few years. Also in August, AMGN utilized its strong balance sheet in announcing the acquisition of blockbuster psoriasis drug Otezla for $13.4 billion in cash, which is expected to add over $2 billion to revenue in 2020, and should grow rapidly from that level. Given an undemanding valuation (14x consensus forward P/E), exciting developments in its R&D pipeline, and a better revenue and earnings growth outlook, we believe AMGN shares can perform well from here.
Focus List portfolio companies announced three recent dividend increases: Molson Coors (TAP) +39%, PPG Industries (PPG) +6%, and Expedia Group +6%. We made no changes to the Focus List portfolio during the third quarter, and remain pleased with its positioning as well as the outlook for each of our portfolio companies. Looking ahead, we believe the portfolio is particularly well-positioned to succeed when investors see early signs of improving global economic growth and stabilizing interest rates.
James D. Ragan, CFA Director of WM Research 206.389.4070 [email protected]
Brent P. Williams, CFA Senior Research Analyst 206.389.4076 [email protected]
*Focus List is offered to clients of D.A. Davidson & Co. through our Separate Account Management (SAM) and Unified Managed Account (UMA) programs. Net of fee returns are shown inclusive of a 2.45% annual management fee, the highest fee from those programs at any point during the portfolio’s track record. The fee shown does not reflect the current fee schedule for the SAM or UMA programs. Actual fees will vary and will not exceed the 2.45% used to calculate net of fee performance. 8 Wealth Management Research October 2019
Focus List Portfolio Quality Value Portfolio
Focus List Portfolio 9/30 Total Return EPS Estimates P/Earnings Ratios Yield Price YTD 3 Mo. 1 Mo. FY1 FY2 FY1 FY2 % Focus List (Gross of Fees) — 23.0% 4.0% 3.3% — — 19.4x 17.1x 2.3% Focus List (Net of Fees)* 20.7% 3.4% 3.0% S&P 500 2,976.74 20.6% 1.7% 1.9% $164.11 $181.52 18.1x 16.4x 1.9%
Current Holdings as of 10/10/19 ‘18 Year -End or ‘19 Add Price 9/30 Total Return EPS Estimates P/Earnings Ratios Yield Ticker Date Price Price YTD 3 Mo. 1 Mo. FY1 FY2 FY1 FY2 % Communication Services Activision Blizzard, Inc. ATVI 12/31 $46.57 $52.92 14.6% 12.1% 4.6% $1.33 $1.54 39.8x 34.4x 0.7% Walt Disney Company DIS 12/31 $109.65 $130.32 19.6% -6.1% -5.1% $6.60 $6.51 19.7x 20.0x 1.4% Consumer Discretionary Chipotle Mexican Grill, Inc. CMG 12/31 $431.79 $840.47 94.6% 14.7% 0.2% $13.25 $17.04 63.4x 49.3x 0.0% Expedia Group, Inc. EXPE (A) 12/31 $112.65 $134.41 20.3% 1.3% 3.3% $6.59 $7.94 20.4x 16.9x 1.0% NIKE, Inc. Class B NKE 12/31 $74.14 $93.92 27.7% 12.2% 11.1% $2.47 $2.89 38.0x 32.5x 0.9% Consumer Staples Molson Coors Brewing Company Class B TAP 12/31 $56.16 $57.50 5.0% 3.8% 12.0% $4.99 $5.21 11.5x 11.0x 4.0% Energy Schlumberger NV SLB 12/31 $36.08 $34.17 -1.3% -12.7% 7.0% $1.81 $2.60 18.9x 13.1x 5.9% Financials PNC Financial Services Group, Inc. PNC 12/31 $116.91 $140.16 22.7% 2.9% 8.7% $11.67 $12.75 12.0x 11.0x 3.3% Synchrony Financial SYF 12/31 $23.46 $34.09 48.2% -1.1% 6.4% $5.20 $4.52 6.6x 7.5x 2.6% Umpqua Holdings Corporation UMPQ (A) 12/31 $15.90 $16.46 7.5% 0.5% 6.1% $1.58 $1.75 10.4x 9.4x 5.1% Health Care Amgen Inc. AMGN 12/31 $194.67 $193.51 1.8% 5.8% -7.2% $14.05 $14.55 13.8x 13.3x 3.0% CVS Health Corporation CVS 4/8 $54.15 $63.07 18.6% 16.8% 3.5% $6.61 $7.51 9.5x 8.4x 3.2% Stryker Corporation SYK 12/31 $156.75 $216.30 39.0% 5.5% -1.7% $8.22 $8.99 26.3x 24.1x 1.0% Industrials A. O. Smith Corporation AOS (A) 4/8 $55.22 $47.71 -12.8% 1.7% 2.6% $2.60 $2.85 18.4x 16.7x 1.8% Deere & Company DE 12/31 $149.17 $168.68 14.7% 2.3% 9.4% $9.54 $11.18 17.7x 15.1x 1.8% General Dynamics Corporation GD 12/31 $157.21 $182.73 18.2% 1.1% -4.5% $11.62 $12.86 15.7x 14.2x 2.2% Information Technology Apple Inc. AAPL (A) 12/31 $157.74 $223.97 43.7% 13.6% 7.3% $10.86 $9.75 20.6x 23.0x 1.4% Intel Corporation INTC (A) 12/31 $46.93 $51.53 11.9% 8.4% 8.7% $4.38 $4.65 11.8x 11.1x 2.4% QUALCOMM Incorporated QCOM (A) 12/31 $56.91 $76.28 37.9% 1.1% -1.2% $4.24 $5.67 18.0x 13.5x 3.3% Materials Avery Dennison Corporation AVY 12/31 $89.83 $113.57 28.4% -1.3% -1.2% $6.55 $6.98 17.3x 16.3x 2.0% PPG Industries, Inc. PPG 12/31 $102.23 $118.51 17.4% 2.0% 7.0% $6.30 $7.26 18.8x 16.3x 1.7% A complete list of past specific recommendations can be found on pages 23-24
Annual Performance (total returns) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Focus List (Gross of Fees) 44.3% 21.8% 0.9% 9.4% 33.6% 5.7% -17.3% 25.0% 14.10% -4.5% 23.0% Focus List (Net of Fees)* 40.9% 18.8% -1.5% 6.8% 30.4% 3.2% -19.3% 22.0% 11.30% -6.8% 20.7% S&P 500 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4% 12.0% 21.80% -4.4% 20.6%
Since Inception Since Rolling Returns (annualized) and Since Inception 1-year 3-year 5-year 10-year Cumulative Annualized Inception Focus List Model Portfolio (Gross of Fees) 7.5% 13.5% 7.3% 10.4% 279.7% 13.2% Focus List Model Portfolio (Net of Fees)* 4.9% 10.7% 4.7% 7.8% 191.9% 10.5% S&P 500 4.3% 13.4% 10.8% 13.2% 313.5% 14.1%
For stocks added to the Focus List Model Portfolio in 2019, YTD total return is calculated from the date it was added through 9/30/19. All prices and return information reflect closing prices. *Focus List is offered to clients of D.A. Davidson & Co. through our Separate Account Management (SAM) and Unified Managed Account (UMA) programs. Net of fee returns are shown inclusive of a 2.45% annual management fee, the highest fee from those programs at any point during the portfolio’s track record. The fee shown does not reflect the current fee schedule for the SAM or UMA programs. Actual fees will vary and will not exceed the 2.45% used to calculate net of fee performance. Focus List is currently prepared by James Ragan, CFA and Brent Williams, CFA. Model Portfolio inception date for the Focus List is 12/31/2008. (A) D. A. Davidson & Co. makes a market in this security. Sources: D.A. Davidson & Co., Morningstar Equity Research, FactSet
9 Wealth Management Research October 2019
Dividend Achievers Philosophy High Quality Growth & Income Strategy
The D.A. Davidson & Co. Dividend Achievers Model Portfolio invests in companies that have a minimum 10-year history of consecutive dividend increases and have a positive outlook for future dividend growth. We expect the overall dividend yield for the portfolio to be above the average market yield. The goal of the portfolio is to emphasize consistent income with a growth component while minimizing risk.
Although we may not have holdings in all sectors at all times, we maintain diversity across most economic sectors. While this can at times reduce the amount of the dividend yield, it will also reduce the overall risk profile to investors. We endeavor to minimize portfolio turnover in order to minimize potential capital gains liability.
We believe that companies with a long history of increasing their dividends have proven themselves able to successfully manage through changes in the economy and within their individual industries. Companies that have gained Dividend Achiever status tend to be large-cap, multi-national firms, and are generally leaders in their industries with strong, consistent management teams.
Market volatility has a significant impact on investors’ portfolios. We have found that the focus on rising income and low portfolio turnover taken by the D.A. Davidson Dividend Achievers Model Portfolio has enabled the portfolio to significantly outperform the market during down years, yet still provide reasonable returns during periods of higher market performance.
The stocks included in the portfolio are selected and supervised by members of D.A. Davidson’s Wealth Management Research and it is actively managed.
10 Wealth Management Research October 2019
Quarterly Portfolio Letter Dividend Achievers Third Quarter 2019 Recap
Dividend Achievers Portfolio Total Return Since Inception (as of 9/30/19) YTD 3 Mo. 1-year 3-year 5-year 10-year Cumulative Annualized Dividend Achievers (Gross of Fees)4 3% 23.7%11 3% 3.6% 49.8% 3% 11.6% 7 6% 10.8% 13.2%7 1% 283.6%11 6% 10.1% Dividend Achievers (Net of Fees)* 21.5% 3.0% 7.1% 8.9% 8.1% 10.5% 172.3% 7.4% S&P 500 20.6% 1.7% 4.3% 13.4% 10.8% 13.2% 234.9% 9.0% Sources: D.A. Davidson & Co., FactSet
When investing in the stock market, investors should always prepare themselves for an uncertain outcome. Whether one is an individual investor or a professional analyst, the only certainty is that no one can know what the market will do tomorrow, next month, or over any time period. Equity investing is not an exercise in prediction of a specific event, but rather an exercise in estimating the probability of various events occurring in the future. Probabilities lead to a range of potential outcomes. When investing over short periods of time (days or months), correctly predicting specific data points is very important. Even if one could gain an informational advantage in the short term, in order to maintain a long track record of outperformance the investor must close a position once the predicted data point becomes public and move on to the next idea.
Long-term investors have two advantages over short-term investors. First, over a long horizon, just a few simple drivers affect business performance. “Can the business grow sales?” “Is a company taking share from its competitors?” “Can margins expand over time?” These types of questions rely less on precision and more on a qualitative understanding of how a business makes money. Second, when the research process leads an analyst to identify a successful company, instead of selling quickly and realizing a relatively small profit, investors can make fewer decisions while giving their capital the opportunity to compound over time. We believe our investors will benefit from remaining focused on owning great business where the range of potential investment outcomes is skewed in their favor and allowing these companies to compound over time in their portfolio.
During the third quarter, several of our top contributors had positive returns without any significant news. Three - Chubb Ltd (CB), NextEra Energy (NEE), and Costco Wholesale (COST) - weathered the storm particularly well as volatility increased in the S&P 500. Outperformance when markets are volatile is a key objective for the portfolio. With respect to these three businesses, in our view, each has a simple, straightforward business model along with the ability to reinvest in the business and grow organically. We expect that this organic growth will lead to sustainable dividend growth, another key portfolio objective.
Two negative contributors, 3M (MMM) and Johnson & Johnson (JNJ) are dealing with negative headlines from legal exposure related to product safety. MMM faces environmental cleanup liability related to its manufacturing of substances called PFAS, which were used in products such as Scotchgard and Teflon, and are widely believed to have adverse health effects. Many companies manufactured PFAS historically. MMM was one of the first to stop using them, which it did voluntarily in 2000, and has proactively pushed for EPA regulation of the substances. JNJ continues to deal with lawsuits related to the presence of asbestos in the raw materials used as ingredients in its talc powder, as well as a now-divested business that manufactured opioid painkillers. We expect that both companies will need to contribute financially to resolve their respective cases going forward. The balance sheet health and cash flow profile of each give us confidence that any future exposure will be manageable and have limited impact on our investment thesis for the businesses going forward.
James D. Ragan, CFA Director of WM Research 206.389.4070 [email protected]
Matthew G. Griffith, CFA Senior Research Analyst 206.389.4011 [email protected]
*Dividend Achievers is offered to clients of D.A. Davidson & Co. through our Separate Account Management (SAM) and Unified Managed Account (UMA) programs. Net of fee returns are shown inclusive of a 2.45% annual management fee, the highest fee from those programs at any point during the portfolio’s track record. The fee shown does not reflect the current fee schedule for the SAM or UMA programs. Actual fees will vary and will not exceed the 2.45% used to calculate net of fee performance. 11 Wealth Management Research October 2019
Dividend Achievers Portfolio High Quality Growth & Income Strategy
Dividend Achievers Portfolio 9/30 Total Return EPS Estimates P/Earnings Ratios Yield Price YTD 3 Mo. 1 Mo. FY1 FY2 FY1 FY2 % Dividend Achievers (Gross of Fees) — 23.7% 3.6% 3.2% — — — — 2.9% Dividend Achievers (Net of Fees)* 21.5% 3.0% 3.0% S&P 500 2,976.74 20.6% 1.7% 1.9% $164.12 $181.52 18.1x 16.4x 1.9%
Current Holdings as of 10/10/19 ‘18 Year -End or Dividend Statistics # of '19 Add Price 9/30 Total Return Payout 10-Year Paid Yield Years Ticker Date Price Price YTD 3 Mo. 1 Mo. Ratio CAGR Increases Since %
Communication Services AT&T Inc. T (A) 12/31 $28.54 $37.84 39.1% 14.6% 7.3% 58.0% 2.3% 35 1881 5.4% Consumer Discretionary V.F. Corporation VFC 12/31 $67.15 $88.99 34.8% 2.4% 9.1% 48.3% 12.5% 46 1973 1.9% Consumer Staples Costco Wholesale Corporation COST 12/31 $203.71 $288.11 42.5% 9.3% -2.3% 31.7% 13.6% 14 2004 0.9% Kimberly-Clark Corporation KMB 12/31 $113.94 $142.05 27.7% 7.4% 1.4% 62.3% 5.7% 47 1935 2.9% Energy Exxon Mobil Corporation XOM 12/31 $68.19 $70.61 7.2% -6.7% 3.1% 73.1% 7.6% 37 1882 4.9% Financials Chubb Limited CB 12/31 $129.18 $161.44 26.9% 10.1% 3.8% 31.8% 10.3% 26 1993 1.9% Health Care Johnson & Johnson JNJ 12/31 $129.05 $129.38 2.4% -6.4% 0.8% 46.5% 7.0% 57 1944 2.9% Novartis AG NVS 12/31 $75.87 $86.90 16.9% -4.8% -3.6% 40.5% 5.8% 22 1996 3.3% Industrials Emerson Electric Co. EMR 12/31 $59.75 $66.86 14.6% 1.1% 12.2% 56.6% 4.7% 63 1947 2.9% 3M Company MMM 12/31 $190.54 $164.40 -11.6% -4.3% 1.7% 57.7% 10.5% 61 1916 3.5% United Technologies Corporation UTX 12/31 $106.48 $136.52 30.4% 5.5% 4.8% 38.6% 7.7% 23 1936 2.2% Information Technology Automatic Data Processing, Inc. ADP 12/31 $131.12 $161.42 25.0% -1.9% -4.5% 58.0% 8.6% 44 1974 2.0% International Business Machines Corporation IBM 12/31 $113.67 $145.42 32.5% 6.7% 7.3% 46.9% 12.6% 24 1913 4.5% Microsoft Corporation MSFT (A) 12/31 $101.57 $139.03 38.4% 4.1% 0.8% 42.9% 14.1% 16 2003 1.5% Utilities NextEra Energy, Inc. NEE 12/31 $173.82 $232.99 36.6% 14.4% 6.3% 64.9% 9.6% 23 1945 2.1%
A complete list of past specific recommendations can be found on page 25
Annual Performance (total returns) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Dividend Achievers (Gross of Fees) -18.6% 13.8% 17.3% 12.9% 13.7% 24.6% 10.3% 2.6% 12.1% 16.0% -4.3% 23.7% Dividend Achievers (Net of Fees)* -20.6% 11.0% 14.4% 10.2% 11.0% 21.6% 7.6% 0.1% 9.4% 13.2% -6.6% 21.5% S&P 500 -37.0% 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4% 12.0% 21.8% -4.4% 20.6%
Since Inception Rolling Returns (annualized) and Since Inception 1-year 3-year 5-year 10-year Cumulative Annualized Dividend Achievers Model Portfolio (Gross of Fees) 9.8% 11.6% 10.8% 13.2% 283.6% 10.1% Dividend Achievers Model Portfolio (Net of Fees)* 7.1% 8.9% 8.1% 10.5% 172.3% 7.4% S&P 500 4.3% 13.4% 10.8% 13.2% 234.9% 9.0%
For stocks added to the Dividend Achievers Model Portfolio in 2019, YTD total return is calculated from the date it was added through 9/30/19. All prices and return information reflect closing prices *Dividend Achievers is offered to clients of D.A. Davidson & Co. through our Separate Account Management (SAM) and Unified Managed Account (UMA) programs. Net of fee returns are shown inclusive of a 2.45% annual management fee, the highest fee from those programs at any point during the portfolio’s track record. The fee shown does not reflect the current fee schedule for the SAM or UMA programs. Actual fees will vary and will not exceed the 2.45% used to calculate net of fee performance. Dividend Achievers is currently prepared by James Ragan, CFA and Matthew Griffith, CFA. Model Portfolio inception date for Dividend Achievers is 10/6/2005. (A) D. A. Davidson & Co. makes a market in this security. Sources: D.A. Davidson & Co., Morningstar Equity Research, FactSet 12 Wealth Management Research October 2019
ESG Achievers Philosophy Sustainable Investing Strategy
ESG Achievers seeks long-term outperformance relative to the S&P 500 through investment in stocks of high-quality companies that score favorably on Environmental, Social, and Governance (ESG) criteria.
D.A. Davidson has partnered with Sustainalytics, a global leader in ESG research, to evaluate the ESG characteristics of a broad universe of publicly-traded companies, mutual funds, and ETFs.
ESG Achievers is a concentrated equity portfolio constructed from a universe of companies with favorable ESG ratings relative to peers. Our Wealth Management Research team utilizes Sustainalytics research on the 1,000 largest companies in the U.S. to create an investable universe consisting of companies in the top 25% of ESG ratings relative to peers in their subindustry.
We invest in high quality companies, which we identify as those demonstrating industry leadership, skilled management, resilient profitability, and balance sheet strength.
The portfolio is constructed through equal-weighted investment in 18 to 22 stocks. We have a large-cap focus, but mid-cap companies are considered. The portfolio is diversified by business sector, while maintaining flexibility to overweight or underweight where we see opportunity.
ESG Achievers is a differentiated way to invest in ESG. Research is available for each position detailing both the investment and ESG rationale for its ownership in the portfolio.
13 Wealth Management Research October 2019
Quarterly Portfolio Letter ESG Achievers Third Quarter 2019 Recap
ESG Achievers Portfolio Total Return Since Inception (as of 9/30/19) YTD 3 Mo. 1-Year Cumulative Annualized
ESG Achievers (Gross of Fees) 23.6% 4.2% 11.6% 14.7% 12.5% ESG Achievers (Net of Fees)* 21.3% 3.6% 8.9% 11.5% 9.8% S&P 500 20.6% 1.7% 4.3% 8.3% 7.0% Sources: D.A. Davidson & Co., FactSet
Our team’s investment process strives to identify high-quality businesses that we believe can outperform the broad equity market over our investors’ time horizon. When constructing our initial ESG Achievers portfolio just over a year ago, we were intentional about maintaining this disciplined process that has served our clients well over time. Additionally, our research on the implementation of ESG investing strategies gave us confidence that we could build a portfolio that delivered on client objectives to own companies focused on effective management of the ESG risks inherent in their businesses without limiting portfolio returns or adding meaningful risk to the portfolio. Though 14 months is too short of a period over which to evaluate our success, we are encouraged by our initial results.
During the third quarter, the dispersion of returns for the stocks held in our portfolio was wide relative to the S&P 500’s return of 1.7%. United Parcel Service (UPS) continues to see strong volume growth in its domestic business, led by 30% year-over-year growth in volume for Next Day Air services. UPS has historically been one of the strongest operators in the air freight and logistics industry, with margins at the high end of its peer group and strong returns on capital. Over the past several years, though UPS has continued to see volumes grow due to tailwind of e-commerce, free cash flow generation has failed to grow as UPS has invested to build capacity in its network. The company is making progress towards the target it set at its 2018 investor day to improve free cash flow by $1 billion. In the short term, management will reinvest this cash flow into the business. One example of this investment is the company’s progress toward delivery of packages using drones. In October, UPS received approval from the U.S. government to operate a drone-based airline and completed its first revenue-generating delivery. Over the long term, we expect that investments like these will help the company generate strong returns for UPS shareholders.
Prudential Financial (PRU) declined after releasing second quarter results that disappointed investors, particularly given the long-term financial targets it set at an investor day in June 2019. PRU will incur restructuring costs during 2019 that will not result in benefits until future years. The company also made adjustments to its mortality assumptions and the yield on its fixed income portfolio was negatively impacted by lower interest rates. We view these issues as transitory and believe at current valuation levels that the risk for downside to earnings is priced into the stock, which trades at just 6.8x the consensus EPS estimate for the next twelve months. Along with its dividend, which currently yields 4.6%, we believe PRU presents an attractive total return opportunity for investors.
ESG-related topics in the news include the Council of Institutional Investors (CII) recent release of Policies on Executive Compensation. The Council represents asset managers and other interested organizations (including Sustainalytics, our ESG research partner) with over $35 trillion in assets under management. CII’s policies are intended to better align management interests with those of company stakeholders, as well as to encourage a long-term approach (5+ years) when setting compensation. CII also recommends that, boards should consider executive compensation levels relative to employees throughout the company.
Matthew G. Griffith, CFA Senior Research Analyst 206.389.4011 [email protected]
Brent P. Williams, CFA Senior Research Analyst 206.389.4076 [email protected]
*ESG Achievers is offered to clients of D.A. Davidson & Co. through our Separate Account Management (SAM) and Unified Managed Account (UMA) programs. Net of fee returns are shown inclusive of a 2.45% annual management fee, the highest fee from those programs at any point during the portfolio’s track record. The fee shown does not reflect the current fee schedule for the SAM or UMA programs. Actual fees will vary and will not exceed the 2.45% used to calculate net of fee performance. 14 Wealth Management Research October 2019
ESG Achievers Portfolio Sustainable Investing Strategy
ESG Achievers Portfolio 9/30 Total Return Yield Price YTD 3 Mo. 1 Mo. % ESG Achievers (Gross of Fees) — 23.6% 4.2% 2.6% 2.8% ESG Achievers (Net of Fees)** 21.3% 3.6% 2.4% S&P 500 2,976.74 20.6% 1.7% 1.9% 1.9% Current Holdings as of 10/10/19 ‘18 Year-End or Sustainalytics '19 Add Price 9/30 Total Return Yield ESG Risk Rating Ticker Date Price Price YTD 3-Mo. 1 Mo. % Percentile Rank*** Communication Services Walt Disney Company DIS 12/31 $128.86 $130.32 -1.1% -6.1% -5.1% 1.4% 14 AT&T Inc. T (A) 12/31 $37.03 $37.84 -0.8% 14.6% 7.3% 5.4% 21 Consumer Discretionary V.F. Corporation VFC 12/31 $88.53 $88.99 -0.5% 2.4% 9.1% 1.9% 8 Consumer Staples Kimberly-Clark Corporation KMB 12/31 $136.86 $142.05 -3.7% 7.4% 1.4% 2.9% 16 Financials PNC Financial Services Group, Inc. PNC 6/17 $132.54 $140.16 6.6% 2.9% 8.7% 3.3% 1 Prudential Financial, Inc. PRU 12/31 $86.41 $89.95 -3.9% -9.9% 12.3% 4.4% 6 S&P Global, Inc. SPGI 12/31 $248.49 $244.98 1.4% 7.8% -5.8% 0.9% 1 Health Care Amgen Inc. AMGN 4/8 $194.88 $193.51 0.9% 5.8% -7.2% 3.0% 2 CVS Health Corporation CVS 12/31 $60.83 $63.07 -2.8% 16.8% 3.5% 3.2% 5 Johnson & Johnson JNJ 12/31 $129.14 $129.38 -0.2% -6.4% 0.8% 2.9% 6 Industrials Alaska Air Group, Inc. ALK 6/17 $62.52 $64.91 4.4% 2.2% 8.7% 2.2% 1 3M Company MMM 12/31 $150.97 $164.40 -8.2% -4.3% 1.7% 3.5% 4 United Parcel Service, Inc. Class B UPS 12/31 $113.55 $119.82 -5.2% 17.0% 1.0% 3.2% 19 Information Technology International Business Machines Corporation IBM 12/31 $139.61 $145.42 -4.0% 6.7% 7.3% 4.5% 5 Intel Corporation INTC (A) 12/31 $50.51 $51.53 -1.4% 8.4% 8.7% 2.4% 2 Microsoft Corporation MSFT (A) 12/31 $137.87 $139.03 -0.5% 4.1% 0.8% 1.5% 3 QUALCOMM Incorporated QCOM (A) 12/31 $74.45 $76.28 -2.4% 1.1% -1.2% 3.3% 7 Materials Linde plc LIN 12/31 $186.65 $193.72 -3.6% -3.1% 2.5% 1.8% 1 Real Estate HCP, Inc. HCP 12/31 $36.51 $35.63 2.5% 12.7% 2.7% 4.2% 3 Utilities American Water Works Company, Inc. AWK 12/31 $124.74 $124.23 0.4% 7.5% -2.4% 1.6% 13 A complete list of past specific recommendations can be found on page 26
Annual Performance (total returns) 2018* 2019 ESG Achievers (Gross of Fees) -7.1% 23.6% ESG Achievers (Net of Fees)** -8.1% 21.3% S&P 500 -10.2% 20.6%
Since Inception Rolling Returns (annualized) and Since Inception 1-year 3-year 5-year 10-year Cumulative Annualized ESG Achievers Model Portfolio (Gross of Fees) 11.6% ------14.7% 12.5% ESG Achievers Model Portfolio (Net of Fees)** 8.9% ------11.5% 9.8% S&P 500 4.3% ------8.3% 7.0% * 2018 returns are since portfolio inception on 7/31/2018 For stocks added to the ESG Achievers Model Portfolio in 2019, YTD total return is calculated from the date it was added through 9/30/19. All prices and return information reflect closing prices. **ESG Achievers is offered to clients of D.A. Davidson & Co. through our Separate Account Management (SAM) and Unified Managed Account (UMA) programs. Net of fee returns are shown inclusive of a 2.45% annual management fee, the highest fee from those programs at any point during the portfolio’s track record. The fee shown does not reflect the current fee schedule for the SAM or UMA programs. Actual fees will vary and will not exceed the 2.45% used to calculate net of fee performance. ***Sustainalytics ESG Risk Rating Percentile Rankings are displayed as a percentile, from 1% to 100%, relative to a company’s respective subindustry group. For example, a ranking of 25% represents a company that ranks in the top 25% of companies within its subindustry ESG Achievers is currently prepared by Matthew Griffith, CFA and Brent Williams, CFA. Model Portfolio inception date for the ESG Achievers is 7/31/2018. (A) D. A. Davidson & Co. makes a market in this security. Sources: D.A. Davidson & Co., Morningstar Equity Research, FactSet
15 Wealth Management Research October 2019
WM Research – Primary Coverage Summary
Price Market Cap Price Rating Sector Style Yield (10/10/19) (MM) Target
James D. Ragan, CFA • [email protected] • (206) 389-4070
Caterpillar Inc. CAT $122.69 $69,024 NEUTRAL $137.00 Industrials Large-Cap Growth 3.4% General Electric Company GE $8.45 $73,744 BUY/ADD $12.00 Industrials Large-Cap Value 0.5% Home Depot, Inc. HD $231.61 $253,648 NEUTRAL $204.00 Consumer Discretionary Large-Cap Growth 2.3% Intel Corporation INTC (A) $51.11 $226,417 BUY/ADD $61.00 Information Technology Large-Cap Value 2.5% Microsoft Corporation MSFT (A) $139.10 $1,062,085 BUY/ADD $155.00 Information Technology Large-Cap Growth 1.5% Nordstrom, Inc. JWN $33.76 $5,230 BUY/ADD $45.00 Consumer Discretionary Large-Cap Value 4.4% QUALCOMM Incorporated QCOM (A) $74.97 $91,138 BUY/ADD $91.00 Information Technology Large-Cap Growth 3.3%
Matt G. Griffith, CFA • [email protected] • (206) 389-4011
Alaska Air Group, Inc. ALK $64.88 $7,998 BUY/ADD $77.00 Industrials Mid-Cap Value 2.2% Avery Dennison Corporation AVY $111.30 $9,371 BUY/ADD $141.00 Materials Mid-Cap Value 2.1% Deere & Company DE $167.80 $52,836 BUY/ADD $204.00 Industrials Large-Cap Value 1.8% Walt Disney Company DIS $129.34 $232,990 BUY/ADD $160.00 Communication Services Large-Cap Value 1.4% Duke Energy Corporation DUK $96.29 $70,157 BUY/ADD $103.00 Utilities Large-Cap Value 3.9% PNC Financial Services Group, Inc. PNC $138.42 $61,632 BUY/ADD $167.00 Financials Large-Cap Value 3.3% Spotify Technology SA SPOT $112.52 $20,224 BUY/ADD $184.00 Communication Services Large-Cap Growth 0.0% Target Corporation TGT $110.57 $56,493 BUY/ADD $132.00 Consumer Discretionary Large-Cap Value 2.4%
Brent P. Williams, CFA • [email protected] • (206) 389-4076
Amgen Inc. AMGN $198.68 $119,149 BUY/ADD $256.00 Health Care Large-Cap Blend 2.9% Costco Wholesale Corporation COST $297.14 $130,630 BUY/ADD $318.00 Consumer Staples Large-Cap Growth 0.9% General Dynamics Corporation GD $176.69 $51,036 BUY/ADD $240.00 Industrials Large-Cap Value 2.3% Molson Coors Brewing Company Class B TAP $55.72 $10,934 BUY/ADD $72.00 Consumer Staples Large-Cap Value 4.1% PPG Industries, Inc. PPG $115.66 $27,330 BUY/ADD $138.00 Materials Large-Cap Value 1.8% Stryker Corporation SYK $211.29 $78,833 BUY/ADD $245.00 Health Care Large-Cap Growth 1.0% Zoetis, Inc. Class A ZTS $127.41 $60,846 NEUTRAL $120.00 Health Care Large-Cap Growth 0.5%
(A) D. A. Davidson & Co. makes a market in this security. Rating and pricing information as of October 10, 2019. For a copy of the full referenced report for companies mentioned, please contact your D.A. Davidson & Co. representative or call 206-389-8000. 16 Wealth Management Research October 2019
U.S. Equities Performance Report
Current September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week U.S. Equity Markets Level % Return % Return % Return % Return % Return % Return High Low S&P 500 2,976.74 1.9% 1.7% 20.6% 4.3% 10.8% 13.2% 1.6% 26.6% DJ Industrial Average 26,916.83 2.1% 1.8% 17.5% 4.2% 12.3% 13.6% 1.6% 23.5% NASDAQ Composite Index 7,999.34 0.5% 0.2% 21.5% 0.5% 13.5% 15.5% 4.0% 29.2% Russell 2000 1,523.37 2.1% -2.4% 14.2% -8.9% 8.2% 11.2% 8.9% 20.2% Russell 2500 624.84 1.8% -1.3% 17.7% -4.0% 8.6% 12.2% 5.6% 23.8%
Sector September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week S&P 500 Sectors Weight % % Return % Return % Return % Return % Return % Return High Low
Consumer Discretionary 10.1% 0.9% 0.5% 22.5% 2.4% 14.0% 17.7% 4.2% 30.9% Consumer Staples 7.6% 1.7% 6.1% 23.3% 16.9% 9.3% 12.3% 0.1% 25.7% Energy 4.5% 3.8% -6.3% 6.0% -19.2% -5.1% 3.3% 24.2% 9.7% Financials 12.9% 4.6% 2.0% 19.6% 3.9% 10.5% 10.8% 2.2% 25.7% Health Care 13.7% -0.2% -2.2% 5.6% -3.6% 8.9% 14.2% 5.8% 11.7% Industrials 9.3% 3.0% 1.0% 22.6% 1.4% 9.7% 13.4% 2.1% 29.0% Information Technology 21.9% 1.5% 3.3% 31.4% 8.6% 18.2% 17.1% 2.7% 39.8% Materials 2.7% 3.2% -0.1% 17.1% 2.7% 5.4% 9.2% 2.2% 23.0% Real Estate 3.2% 1.0% 7.7% 29.7% 24.7% 11.6% 14.7% 1.7% 31.4% Telecommunications Services 10.4% 0.4% 2.2% 21.7% 5.7% 5.2% 9.5% 3.3% 27.8% Utilities 3.6% 4.3% 9.3% 25.4% 27.1% 12.9% 12.5% 0.3% 25.5%
Current September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week Growth & Value Level % Return % Return % Return % Return % Return % Return High Low
Russell 1000 Growth 1,605.39 0.0% 1.5% 23.3% 3.7% 13.4% 14.9% 2.7% 31.2% S&P Mid Cap 400 Growth 908.30 1.3% -0.6% 18.3% -2.5% 9.5% 13.0% 3.1% 24.4% Russell 2000 Growth 978.18 -0.8% -4.2% 15.3% -9.6% 9.1% 12.2% 8.9% 23.4% Russell 1000 Value 1,263.10 3.6% 1.4% 17.8% 4.0% 7.8% 11.5% 1.2% 22.3% S&P Mid Cap 400 Value 639.97 5.0% 0.4% 17.4% -2.4% 8.0% 12.0% 3.9% 22.5% Russell 2000 Value 1,785.71 5.1% -0.6% 12.8% -8.2% 7.2% 10.1% 9.6% 16.9%
Current September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week
Commodity Markets Level % Return % Return % Return % Return % Return % Return High Low
S&P GSCI Spot Index 403.61 1.7% -4.2% 8.6% -16.3% -11.7% -5.4% 19.7% 9.9% Crude Oil ($/bbl) 54.07 -1.8% -7.5% 16.1% -28.8% -19.6% -10.1% 29.2% 27.1% Natural Gas ($/btu) 2.33 0.9% 0.8% -21.0% -21.1% -24.4% -23.1% 51.8% 12.6% Gasoline RBOB ($/gal) 1.57 4.4% -6.9% 29.5% -17.4% -10.9% 0.6% 26.7% 26.4% Gold ($/ozt) 1,472.90 -3.7% 3.3% 12.6% 19.9% 2.4% 2.7% 5.6% 23.9% Silver ($/ozt) 17.00 -7.3% 10.0% 6.6% 11.6% -2.3% -1.4% 13.0% 21.6% High Grade Copper ($/lbs) 2.58 1.1% -5.4% -2.9% -9.5% -4.9% -2.5% 13.1% 2.0% Corn (CBT $/bu) 3.88 4.9% -10.1% -3.7% -1.9% -6.9% -3.0% 15.5% 10.3% Wheat ($/bu) 4.96 7.2% -7.1% -4.9% -7.5% -9.0% -9.8% 9.3% 16.7%
Current September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week
Currency Markets Level % Return % Return % Return % Return % Return % Return High Low
EU Euro (€/$) 1.090 -1.0% -4.3% -4.6% -6.1% -2.9% -2.9% 5.9% 0.0% Japanese Yen ($/¥) 108.075 1.8% 0.3% -1.5% -4.9% -0.3% 1.9% 5.3% 2.6% UK Sterling (£/$) 1.232 1.2% -3.2% -3.2% -5.5% -5.3% -2.6% 7.6% 2.2% Australian Dollar (AUD/$) 0.674 0.1% -3.9% -4.2% -6.8% -5.1% -2.7% 8.3% 0.3% Canadian Dollar ($/CAD) 1.324 -0.4% 1.3% -3.1% 2.4% 3.4% 2.1% 3.1% 3.3% Swiss Franc ($/CHF) 0.997 0.8% 2.3% 1.2% 2.1% 0.9% -0.4% 2.4% 2.8%
Notes: Data as reported through September 30, 2019. Returns include dividends re-invested. 5-year and 10-year returns annualized. Sources: FactSet Prices, Standard & Poor’s, Russell Investments 17 Wealth Management Research October 2019
International Equities Performance Report
Current September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week Regions Level % Return % Return % Return % Return % Return % Return High Low MSCI BRIC 301.61 1.1% -4.5% 8.8% 3.0% 4.6% 2.9% 9.6% 10.3% MSCI EAFE 1,889.36 2.9% -1.0% 13.3% -0.8% 3.8% 5.4% 4.3% 12.0% MSCI EMEA 244.99 1.0% -6.8% 5.7% 1.5% -0.5% 1.5% 9.2% 6.8% MSCI Emerging Markets 1,001.00 1.9% -4.1% 6.2% -1.6% 2.7% 3.7% 8.7% 7.1% MSCI Euro 1,105.58 2.8% -1.9% 14.8% -0.3% 3.3% 4.0% 3.7% 13.9% MSCI Europe 1,644.80 2.7% -1.8% 14.4% -0.1% 3.0% 5.2% 3.8% 13.6% MSCI Far East 3,397.79 3.5% 0.8% 10.2% -3.8% 5.8% 6.0% 6.4% 11.8% MSCI Frontier Markets 550.38 -1.9% -1.0% 11.0% 6.2% -0.9% 4.0% 4.0% 8.1% MSCI G7 Index 1,994.59 2.2% 1.1% 18.6% 2.3% 8.4% 10.3% 1.5% 22.1% MSCI North America 2,986.25 1.8% 1.5% 20.7% 4.1% 10.2% 12.6% 1.8% 26.6% MSCI Pacific 2,659.46 3.2% 0.3% 11.7% -1.9% 5.4% 5.8% 5.0% 12.6% MSCI Pan-Euro 1,139.91 2.8% -1.9% 14.2% 1.0% 2.6% 5.0% 3.4% 13.2% MSCI The World Index 2,180.02 2.2% 0.7% 18.1% 2.4% 7.8% 9.6% 1.7% 20.9%
Current September Q3 2019 2019 1 Year 5 Year 10 Year % Off 52 Week
Countries Level % Return % Return % Return % Return % Return % Return High Low Argentina 1,384.17 8.5% -46.8% -31.3% -32.2% -10.8% -0.8% 49.3% 14.0% Australia 812.05 2.4% -1.4% 18.0% 6.3% 4.0% 5.3% 4.3% 16.3% Austria 1,103.91 3.0% -3.0% 6.6% -15.5% 5.9% -0.6% 19.6% 5.3% Belgium 1,551.27 2.8% 3.5% 22.5% 0.2% 2.8% 7.1% 3.9% 21.6% Brazil 2,101.52 2.5% -4.5% 10.8% 25.8% 2.8% -0.7% 10.7% 23.5% Canada 1,730.30 2.3% 0.7% 22.3% 3.8% 1.8% 4.4% 1.2% 23.6% China 74.27 0.0% -4.7% 7.8% -3.8% 6.2% 5.1% 14.1% 9.6% Finland 512.30 2.6% -1.7% 7.5% -8.2% 4.9% 5.3% 11.8% 5.4% France 1,878.98 2.5% -1.6% 16.9% -0.5% 6.1% 5.4% 3.8% 17.1% Germany 1,934.38 2.5% -4.0% 10.7% -6.4% 2.6% 5.2% 9.8% 9.1% Greece 22.87 2.1% -3.0% 27.4% 7.1% -24.0% -25.1% 5.6% 26.7% Hong Kong 11,075.07 -0.7% -11.9% 2.8% -1.8% 6.2% 7.7% 15.8% 8.2% India 563.16 3.1% -5.2% 2.1% 4.7% 3.8% 4.1% 8.0% 15.5% Indonesia 811.20 -2.9% -5.2% 2.5% 12.5% 2.3% 5.6% 8.7% 19.7% Ireland 178.17 3.4% -0.5% 16.5% -4.1% 2.8% 4.8% 6.3% 17.7% Israel 182.86 0.8% -3.7% 2.4% -12.3% -3.3% -0.4% 15.4% 5.8% Italy 261.81 2.9% 0.1% 19.0% 5.0% 0.7% -0.3% 3.8% 15.8% Japan 3,197.80 4.2% 3.3% 11.5% -4.3% 6.0% 5.8% 7.2% 14.0% Korea 422.17 7.2% -4.5% -0.6% -13.3% 2.0% 4.5% 15.5% 10.8% Mexico 4,516.05 2.6% -1.6% 5.1% -14.5% -6.6% 1.9% 18.2% 12.8% Netherlands 3,279.80 2.6% 2.5% 23.5% 10.0% 8.9% 8.3% 2.0% 23.2% New Zealand 155.57 0.3% -2.8% 18.1% 10.5% 8.3% 10.3% 9.6% 21.2% Norway 2,365.98 3.6% -3.3% 6.8% -12.4% -1.2% 4.3% 16.2% 6.5% Portugal 66.41 4.1% 1.8% 15.2% -1.3% 1.3% -3.3% 5.9% 13.6% Russia 702.33 3.3% -0.9% 30.4% 19.4% 8.9% 4.3% 5.6% 25.4% Singapore 3,709.37 1.2% -5.8% 7.1% -0.1% 1.8% 5.2% 8.7% 6.8% South Africa 423.92 -1.2% -12.4% -2.2% -5.8% -1.6% 2.9% 16.8% 5.0% Spain 412.65 4.1% -3.8% 6.1% -3.0% -2.5% -1.0% 6.4% 6.3% Sweden 6,885.01 4.2% -4.8% 8.4% -6.9% 1.7% 6.9% 10.6% 8.4% Switzerland 5,880.71 0.7% 0.3% 24.1% 13.0% 6.0% 8.9% 1.5% 24.0% United Kingdom 1,092.28 4.2% -2.5% 10.2% -2.8% 0.5% 4.8% 7.5% 8.9% USA 2,832.91 1.8% 1.6% 20.6% 4.1% 10.7% 13.2% 1.9% 26.8%
Notes: Data as reported through September 30, 2019. Returns include dividends re-invested. 5-year and 10-year returns annualized. Returns are in U.S. dollars. Sources: FactSet Prices, MSCI Barra 18 Wealth Management Research October 2019
U.S. Economic Report
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Interest Rates Reported Level Level Level Level Level Fed Funds Target Rate (%) 2.000 2.000 2.500 2.500 2.500 2.250 10-Year Treasury Yield (%) 1.68 1.68 2.00 2.42 2.68 3.05 10-Year – 2-Year U.S. Treasury Spread (bps) 6.28 6.28 26.55 14.96 18.36 24.74 3-Month USD LIBOR (%) 2.09 2.09 2.32 2.60 2.81 2.40 TED Spread (bps) 29.51 29.51 24.49 24.98 40.26 24.59 S&P 500 Consensus Next 12 Months EPS 177.13 177.13 175.78 172.47 173.30 172.67
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Government Finance Reported Level Level Level Level Level Current Account Balance (bil. $) -128.19 - -128.19 -136.19 -143.93 -125.74 Current Account Balance as % of GDP -2.40 - -2.40 -2.58 -2.75 -2.42 Federal Government Debt (bil. $, AR) 18,398.08 - 18,398.08 18,302.70 17,865.03 17,703.07 Federal Governmentt Debt (Y/Y %) 5.47 - 5.47 6.41 7.58 7.08
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Employment Reported Level Level Level Level Level Average Hourly Earnings (Y/Y %) 2.89 2.89 3.18 3.24 3.34 2.98 Average Hourly Earnings – inflation adjusted (Y/Y %) 1.73 1.73 1.69 1.52 1.55 0.75 Change in Nonfarm Employment (M/M, thousands of 136.00 136.00 178.00 153.00 227.00 108.00 persons) Civilian Unemployment Rate (%) 3.50 3.50 3.70 3.80 3.90 3.70 Initial Unemployment Claims (thousands of claims) - - 222.00 204.00 221.00 218.00
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Housing & Construction Reported Level Level Level Level Level Building Permits (millions of units, SAAR) 1.425 - 1.232 1.288 1.339 1.288 Housing Starts (millions of units, SAAR) 1.364 - 1.233 1.199 1.142 1.236 New Home Sales (millions of units, SAAR) 0.713 - 0.729 0.693 0.564 0.607 Private Residential Construction Put in Place (Y/Y %) -5.00 - -8.53 -8.91 -6.95 -0.06 S&P/Case-Shiller Home Price Index (20 City, Y/Y %) 2.00 - 2.16 2.57 4.05 5.15
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Inflation Reported Level Level Level Level Level Consumer Price Index (Y/Y %, NSA) 1.73 1.73 1.66 1.86 1.95 2.27 Core CPI (Y/Y %, NSA) 2.36 2.36 2.13 2.04 2.21 2.18 Producer Price Index (Y/Y %, NSA) 1.37 1.37 1.72 1.99 2.64 2.73 Core PPI (Y/Y %, NSA) 1.65 1.65 2.12 2.23 2.82 3.13 Personal Consumption Expenditures (Y/Y %, NSA) 1.44 - 1.36 1.40 1.78 2.02 Core PCE (Y/Y %, NSA) 1.77 - 1.61 1.48 1.97 2.00
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Personal Income & Spending Reported Level Level Level Level Level Household Net Worth (bil. $) 113,463 - 113,463 111,613 106,285 110,197 Household Net Worth (Y/Y %) 4.93 - 4.93 5.03 0.65 7.01 Personal Income (Y/Y %, SAAR) 4.58 - 4.94 4.73 5.02 5.44 Personal Savings Rate (%) 8.10 - 8.10 8.40 8.80 7.50
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Production Reported Level Level Level Level Level Capacity Utilization (%) 77.90 - 77.75 78.40 79.46 79.25 Industrial Production (Y/Y %, SA) 0.36 - 1.10 2.26 3.77 5.41 Real GDP Growth (Q/Q %, SAAR) 2.00 - 2.00 3.10 1.10 2.90
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Retail Sales Reported Level Level Level Level Level Consumer Credit (bil. $, Q/Q change) 47.01 - 47.01 42.79 53.73 60.79 Retail Sales (Y/Y %, SA) 4.57 - 3.28 3.81 0.99 3.51 Retail Sales ex. Motor Vehicles (Y/Y %, SA) 3.94 - 3.15 3.69 0.49 4.70 Total Unit Vehicle Sales (millions of units) 17.19 17.19 17.18 17.26 17.38 17.32
Last Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Survey Data Reported Level Level Level Level Level Consumer Confidence (Conference Board, 1985=100) 125.10 125.10 124.30 124.20 126.60 135.30 ISM Manufacturing Report (%) 47.80 47.80 51.70 55.30 54.30 59.50 ISM Non-Manufacturing Report (%) 52.60 52.60 55.10 56.10 58.00 60.80 Leading Economic Indicators Index (M/M %) 0.00 - 0.00 0.18 -0.18 0.54
Notes: Data as reported through September 30, 2019. BPS is basis points. AR is annual rate. SA is seasonally adjusted rate. SAAR is seasonally adjusted annual rate. Sources: FactSet 19 Wealth Management Research October 2019
Required Disclosures
D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from one or more of the companies mentioned in this report in the next three months.
D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. The analysts principally responsible for the preparation of this report will receive compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. D.A. Davidson & Co.’s analysts, however, are not directly compensated for involvement in specific investment banking transactions.
James Ragan, the analyst who prepared this report, or his immediate family owns an investment position in: AAPL, COST, DIS, GE, GOOGL, IBM, INTC, MSFT, QCOM, SLB, T
Matt Griffith, the analyst who prepared this report, or his immediate family owns an investment position in: ADP, ALK, COST, CVS, DE, DIS, MMM, PNC, SPOT, VFC
Brent Williams, the analyst who prepared this report, or his immediate family owns an investment position in: AMGN, ATVI, CMG, DIS, EXPE, GD, QCOM, SLB, SYF, SYK, UMPQ
The following disclosures apply to stocks mentioned in this report if and as indicated:
(A) D.A. Davidson & Co. was making a market in this company’s securities at the time this report was published.
The analysts identified in this report attest that (i) all the views expressed accurately reflect their personal views about the common stock of the subject company, and (ii) no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Ratings Information: Buy/Add - Security appears undervalued based on our current view of valuation measures, expectations, and its risk profile. Neutral - Security appears fairly valued based on our current view of valuation measures, expectations, and its risk profile. Sell/Reduce - Security appears over-valued based on our current view of valuation measures, expectations, and its risk profile.
Rating Distribution (as of 9/30/2019) Coverage Universe Distribution Investment Banking Distribution azbycx IR WMR Combined IR WMR Combined BUY/ADD (Buy) 57% 87% 59% 12% 0% 10% NEUTRAL (Hold) 42% 13% 40% 6% 0% 6% SELL/REDUCE (Sell) 1% 0% 1% 0% 0% 0% WMR denotes Wealth Management Research; IR denotes Institutional Research whose rating scale is Buy, Neutral, Underperform. Investment Banking Distribution denotes companies from whom D.A. Davidson & Co. has received compensation in the last 12 months.
Price targets are an evaluation of price potential over the next 12-18 months based upon assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria. Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic fluctuations and unforeseen changes in the subject company’s fundamentals or business trends
Focus List Securities Selection and Publication Process:
Focus List (the “Portfolio”) is prepared by James Ragan and Brent Williams of D.A. Davidson & Co. Wealth Management Research (WMR). To be eligible for addition to the Portfolio, securities must be covered by D.A. Davidson & Co. WMR, Institutional Research, or Morningstar Equity Research. Eligible securities are common stocks and exchange traded funds (ETFs). Common stocks must be rated an equivalent “Buy” from D.A. Davidson & Co. WMR or Institutional Research, or 3 stars or higher by Morningstar at the time the security is added to the Portfolio. Other than Mr. Ragan and Mr. Williams, D.A. Davidson & Co. analysts who publish WMR or Institutional Research are not involved in the management of the Portfolio.
The Portfolio seeks long-term outperformance versus the broad market through investment in stocks of quality companies. Mr. Ragan and Mr. Williams identify quality by evaluating potential candidates for industry leadership, skilled management, resilient profitability, and balance sheet strength, and investments must offer compelling risk/reward (value) in the opinion of Mr. Ragan and Mr. Williams. The Portfolio is diversified by industry sector, although Mr. Ragan and Mr. Williams maintain flexibility to overweight or underweight in sectors where they view opportunity. In order to minimize turnover, maintain tax efficiency, and allow time for an investment thesis to develop, the Portfolio seeks a multi-year holding period in each position. Given the Portfolio’s longer-term investment horizon compared to that of the primary coverage source, the Portfolio may continue to maintain a position in a security if its rating is lowered to the equivalent of “Hold” or “Neutral.” Securities are removed from the Portfolio if the primary coverage source rating is lowered to an equivalent of “Sell,” if there is a detrimental or significant change in company or industry fundamentals, and/or if a security exceeds Mr. Ragan and Mr. Williams’ view of fair value.
20 Wealth Management Research October 2019
Required Disclosures
Dividend Achievers Securities Selection and Publication Process:
Dividend Achievers is prepared by James Ragan and Matt Griffith of D.A. Davidson & Co. Wealth Management Research (WMR). To be eligible for inclusion in Dividend Achievers, securities must be covered by D.A. Davidson & Co.’s WMR, Institutional Research, or Morningstar Equity Research (the “Research Universe”). Other than Mr. Ragan and Mr. Griffith, D.A. Davidson & Co. analysts who publish WMR or Institutional Research are not involved in the preparation of Dividend Achievers.
Of all the eligible securities from the Research Universe, those ultimately selected for inclusion in Dividend Achievers will have a minimum 10- year history of consecutive dividend increases and, in the opinion of Mr. Ragan and Mr. Griffith, have a positive outlook for future growth. The overall dividend yield for Dividend Achievers is expected to be above the average market yield. Dividend Achievers may not have holdings in all sectors at all times, but Mr. Ragan and Mr. Griffith strive to maintain diversity across most economic sectors. Securities may be removed from Dividend Achievers if the underlying company fails to sustain its record of consecutive annual dividend increases or if there is a significant change in company fundamentals. Changes to Dividend Achievers may also be prompted by Mr. Ragan and Mr. Griffith’s views of the risk/reward profile offered by individual securities.
ESG Achievers Securities Selection and Publication Process:
ESG Achievers is prepared by Matt Griffith and Brent Williams of D.A. Davidson & Co.’s Wealth Management Research (WMR). To be eligible for addition to ESG Achievers, securities must be covered by WMR, D.A. Davidson & Co.’s Institutional Research, or Morningstar Equity Research (the “Research Universe”). Other than Mr. Griffith and Mr. Williams, D.A. Davidson & Co. analysts who publish WMR or Institutional Research are not involved in the preparation of ESG Achievers.
Of all the eligible securities from the Research Universe, those ultimately selected for inclusion will have an ESG Risk Ratings score from Sustainalytics that ranks in the top quartile (top 25%) of its subindustry, when compared to a company’s peers at the time of addition to ESG Achievers. Sustainalytics’ ESG Risk Ratings measure a company's exposure to subindustry-specific Environmental, Social, and Governance issues that are the most material to their business. While ESG Achievers may not have holdings in all sectors at all times, Mr. Griffith and Mr. Williams strive to maintain diversity across most economic sectors. Securities may be removed from ESG Achievers if there is a material change in company or industry fundamentals, a deterioration of ESG Risk Rating ranking relative to subindustry peers as measured by Sustainalytics, and/or if Mr. Griffith and Mr. Williams view the risk/reward profile as unattractive.
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Performance Representation Disclosure: Past performance is not a guarantee of future results and Davidson provides no guarantee regarding the performance of your accounts. As noted above the portfolio performance presented “Net of Fees,” means the performance reflects the deduction of applicable account fees. Account returns presented “Gross of Fees” do not reflect the deduction of fees. Wealth Management Research model portfolio returns shown are the actual returns of the single model portfolio representative account held for each portfolio. Actual client account performance will vary depending on the timing of investment allocations and other transaction as well as the actual fees and other expenses incurred in a client’s account. Please see the Net of Fees disclosure above. Performance information reflects time-weighted rates of return, which measures the compounded rate of growth excluding the inflow or outflow of funds in portfolio. Total returns reflect transaction costs, market appreciation or depreciation and the reinvestment of capital gains, dividends, interest and other income. Yield reflects the current estimated annual income divided by the current market value of the security as of the closing date of this Report. Estimated Annual Income and Yield are estimates, and the actual income and yield might be lower or higher than the estimated amounts. Yield reflects only the income generated by an investment and does not reflect changes in the security’s price, which may fluctuate.
Benchmark Disclosure: Indices or benchmarks are included to provide a reference point when comparing the performance of a portfolio or strategy. A benchmark is an unmanaged index or combination of indices, and does not include any advisory fees, transaction costs or other charges that would be incurred in connection with an actual investment or portfolio. The S&P 500 index was selected as the most appropriate benchmark based on the portfolio’s investment objective and strategy but will include different holdings, and a different allocation in individual securities, industries or sectors. Investors cannot invest directly into a benchmark or index. The S&P 500 is a market cap weighted index that is designed to measure the US large-cap equity performance. The index is composed of the 500 leading publically traded US companies based on size, liquidity, industry, and profitability criteria.
21 Wealth Management Research October 2019
Required Disclosures
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The forward S&P 500 price-to-earnings ratio (P/E) is a valuation measure, calculated by dividing the price of the S&P 500 index over the weighted average earnings per share (EPS) estimate of each company in the index. Earnings are based on “forward” consensus estimates expected over the next 12 months (NTM).
The yield of the 10-year U.S. Treasury bond is a widely followed barometer of the current U.S. interest rate environment.
S&P 500 earnings growth reflect the year over year change in operating earnings on a per share basis. Earnings data are aggregated for all S&P 500 constituents and are measured according to the relative market capitalization weights for each company. Estimated earnings are the combined FactSet estimates of analysts covering each company included in the index.
Non-residential fixed investment is an indicator of U.S. corporate capital expenditures (capex), measured by the amount spent on structures, equipment, and software. Seasonally adjusted annual rate (SAAR) is used to normalize data by adjusting for seasonal changes in business and economic data for a more accurate comparison between different time periods
The ISM Purchasing Managers' Index (PMI) is an indicator of the outlook for the manufacturing (PMI – Manufacturing) and services (PMI – Services) sectors of the economy. The index is based on a wide survey of company executives in these sectors. A reading above 50 indicates expectation for expansion compared to the previous month; a reading below 50 suggests contraction. Seasonally adjusted (SA) is used to normalize data by adjusting for seasonal changes in business and economic data for a more accurate comparison between different time periods.
The Treasury yield curve displays the market interest rate across different contract lengths for U.S. Treasury bonds, indicating the relationship between the interest rate and the time (“term”) to maturity.
The yields of the 10-year and 3-Month U.S. Treasury bonds are widely followed barometers of the current U.S. interest rate environment. The spread is the difference in interest rates between the two securities.
U.S. Personal Consumption Expenditures (PCE) is an indicator of the growth in consumer spending.
Country GDP estimates are aggregated and redistributed by FactSet. This does not constitute investment advice or recommendations of any kind. Estimates data is provided for information purposes only. IMF-Global GDP estimate is the International Monetary Fund’s World Economic Outlook last published on 4/2/19
For a copy of the most recent reports containing all required disclosure information for covered companies referenced in this report, please contact your D.A. Davidson & Co. representative or call 206-389-8000.
22 Wealth Management Research October 2019
Focus List Portfolio Past Specific Recommendation Disclosures
Buy Sell Price Focus List Ticker Date Price Date Price 10/10
A. O. Smith Corporation AOS (A) 04/08/19 $55.21 — — $46.34 Activision Blizzard, Inc. ATVI 11/13/18 $52.67 — — $53.69 Amgen Inc. AMGN 11/27/18 $192.30 — — $198.68 Apple Inc. AAPL (A) 09/25/15 $115.41 — — $230.09 Avery Dennison Corporation AVY 03/02/17 $81.20 — — $111.30 Chipotle Mexican Grill, Inc. CMG 04/20/16 $456.53 — — $827.75 CVS Health Corporation CVS 04/09/19 $54.15 — — $62.14 Deere & Company DE 09/07/16 $84.19 — — $167.80 Expedia Group, Inc. EXPE (A) 03/23/17 $127.58 — — $135.99 General Dynamics Corporation GD 01/11/18 $206.03 — — $176.69 Intel Corporation INTC (A) 01/02/09 $14.51 — — $51.11 Molson Coors Brewing Company Class B TAP 06/27/18 $67.94 — — $55.72 NIKE, Inc. Class B NKE 11/07/17 $55.57 — — $93.00 PNC Financial Services Group, Inc. PNC 09/30/16 $90.53 — — $138.42 PPG Industries, Inc. PPG 07/31/17 $105.48 — — $115.66 QUALCOMM Incorporated QCOM (A) 07/29/14 $75.67 — — $74.97 Schlumberger NV SLB 03/16/16 $73.37 — — $31.07 Stryker Corporation SYK 02/18/16 $97.08 — — $211.29 Synchrony Financial SYF 01/15/16 $27.58 — — $32.49 Umpqua Holdings Corporation UMPQ (A) 10/02/13 $16.32 — — $15.58 Walt Disney Company DIS 01/11/18 $109.79 — — $129.34 General Electric Company GE 07/11/08 $27.66 04/08/19 $9.28 $8.45 Merck & Co., Inc. MRK 12/31/15 $52.78 04/08/19 $81.04 $83.76 Express Scripts Holding Company1 ESRX 10/01/13 $62.03 11/27/18 $98.78 — Nordstrom, Inc. JWN 03/12/14 $62.15 11/13/18 $64.16 $33.76 Zoetis, Inc. Class A ZTS 11/14/16 $49.96 05/01/18 $83.67 $127.41 KBR, Inc. KBR (A) 04/07/14 $26.53 11/01/17 $19.52 $24.07 Dollar General Corporation DG 09/07/16 $71.98 09/07/17 $75.23 $160.52 Church & Dwight Co., Inc. CHD 02/15/17 $48.81 07/31/17 $53.38 $75.63 Harley-Davidson, Inc. HOG 04/02/15 $60.25 03/23/17 $60.50 $33.80 United Natural Foods, Inc. UNFI 06/16/15 $61.21 02/15/17 $45.23 $7.03 International Paper Company IP (A) 03/17/11 $25.45 01/31/17 $56.54 $40.23 Tutor Perini Corporation TPC (A) 08/05/11 $14.08 11/15/16 $29.23 $14.53 Dick's Sporting Goods, Inc. DKS 11/13/14 $48.24 09/23/16 $61.17 $39.20 V.F. Corporation VFC 03/01/13 $37.76 09/06/16 $59.55 $88.62 Marketo Inc.2 N.A. 03/31/15 $26.10 06/01/16 $35.11 — Exelon Corporation EXC 11/27/12 $29.83 04/14/16 $34.86 $47.42 Capital One Financial Corporation COF 09/02/15 $75.06 01/15/16 $62.79 $87.03 Potash Corp of Saskatchewan3 N.A. 12/30/14 $35.60 12/29/15 $17.99 — Triumph Group, Inc. TGI 06/11/14 $70.24 12/23/15 $33.47 $20.34 eBay Inc. EBAY (A) 01/03/14 $22.46 07/21/15 $28.18 $37.93 PayPal Holdings Inc4 PYPL 07/20/15 N.A. 07/21/15 $40.54 $100.54 National Oilwell Varco, Inc. NOV 05/20/13 $63.32 05/21/15 $50.36 $20.68 Devon Energy Corporation DVN 09/05/12 $57.48 04/09/15 $64.96 $20.83 Schnitzer Steel Industries, Inc. Class A SCHN 07/23/13 $26.50 12/30/14 $23.15 $19.80 Oracle Corporation ORCL (A) 05/21/10 $22.01 08/27/14 $41.48 $55.49 Western Union Company WU 01/25/13 $13.57 07/29/14 $17.55 $23.56 Veritiv Corp.5 VRTV 07/02/14 N.A. 07/16/14 $36.61 $14.99 NOW Inc.6 DNOW 06/02/14 N.A. 06/03/14 $34.61 $10.26 Vanguard FTSE Emerging Markets ETF VWO 10/18/12 $42.35 04/07/14 $40.91 $40.54 Greenbrier Companies, Inc. GBX 08/04/11 $16.38 11/05/13 $31.37 $28.50 Charles Schwab Corporation SCHW 03/18/11 $17.79 10/02/13 $21.21 $36.14 Teva Pharmaceutical Industries Limited TEVA 05/26/10 $54.96 10/01/13 $37.83 $6.74 Sponsored ADR Johnson Controls International plc JCI 11/02/12 $24.59 07/18/13 $37.46 $41.79 Total SA Sponsored ADR Class B TOT 02/24/09 $47.80 05/20/13 $50.74 $49.84
Sources: D.A. Davidson & Co., FactSet
23 Wealth Management Research October 2019
Focus List Portfolio Past Specific Recommendation Disclosures
Buy Sell Price Focus List Ticker Date Price Date Price 10/10
SPDR Gold Trust GLD 01/02/09 $86.12 04/11/13 $151.45 $140.81 Coinstar Inc.7 N.A. 07/13/09 $25.22 01/08/13 $49.19 — Titanium Metals Corp.8 N.A. 04/12/12 $13.77 11/12/12 $16.46 — iShares MSCI Emerging Markets ETF EEM 01/04/10 $42.48 10/18/12 $42.06 $41.07 QUALCOMM Incorporated QCOM (A) 03/17/11 $52.61 10/10/12 $59.92 $74.97 Toyota Motor Corp. Sponsored ADR TM 03/22/11 $82.67 10/10/12 $74.88 $132.65 Windstream Holdings, Inc. WIN 08/04/11 $92.49 09/13/12 $84.11 $0.21 Staples Inc.9 N.A. 09/02/10 $18.68 08/23/12 $11.10 — Apple Inc. AAPL (A) 03/17/11 $48.33 02/15/12 $36.13 $230.09 Visa Inc. Class A V 12/29/10 $17.65 02/02/12 $26.38 $174.88 Bristol-Myers Squibb Company BMY 01/02/09 $23.22 10/06/11 $32.39 $50.78 Cisco Systems, Inc. CSCO (A) 05/26/10 $23.53 02/10/11 $19.05 $46.15 QUALCOMM Incorporated QCOM (A) 05/06/10 $37.47 02/10/11 $56.93 $74.97 Plum Creek Timber Company, Inc.10 PCL 05/21/10 $34.69 02/01/11 $41.00 — Exxon Mobil Corporation XOM 01/04/10 $68.78 01/24/11 $79.10 $68.25 KBR, Inc. KBR (A) 01/02/09 $15.26 12/15/10 $29.84 $24.07 Verizon Communications Inc. VZ 10/12/09 $27.09 12/15/10 $34.74 $59.83 Frontier Communications Corporation Class B11 FTR 07/02/10 N.A. 09/08/10 $117.90 $0.99 Gilead Sciences, Inc. GILD 01/04/10 $21.67 07/21/10 $15.97 $63.26 iShares iBoxx $ Investment Grade Corporate LQD 01/02/09 $101.59 05/07/10 $105.21 $126.81 Bond ETF Transocean Ltd. RIG 01/02/09 $49.13 04/29/10 $79.25 $4.22 Financial Select Sector SPDR Fund XLF 01/02/09 $9.96 04/07/10 $13.37 $27.31 Plum Creek Timber Company, Inc.10 PCL 07/13/09 $28.77 04/07/10 $39.87 — Family Dollar Stores Inc.12 N.A. 10/06/09 $28.38 03/10/10 $35.63 — Cadence Design Systems, Inc. CDNS (A) 01/02/09 $3.55 10/16/09 $8.06 $65.54 Coca-Cola Company KO 01/02/09 $22.62 10/12/09 $27.57 $53.66 Caterpillar Inc. CAT 02/24/09 $25.05 09/18/09 $53.50 $122.69 Starbucks Corporation SBUX 01/02/09 $4.75 07/13/09 $6.96 $85.96
Sources: D.A. Davidson & Co., FactSet 1 Company was acquired by Cigna (CI) 2 Company was acquired by Vista Equity Partners LLC (private) 3 Now trades as Nutrien Ltd. (NTR) 4 Spin off from Ebay Inc. (EBAY) 5 Spin off from Internation Paper Company (IP) 6 Spin off from National Oilwell Varco, Inc. (NOV) 7 Company was acquired by Apollo Global Management, LLC (APO) 8 Company was acquired by Precision Castparts Corp., which was then acquired by Berkshire Hathaway Inc. (BRK.B) 9 Company was acquired by Sycamore Partners (private) 10 Company was acquired by Weyerhaesuer Co. (WY) 11 Spin off from Verizaon Communications Inc. (VZ)
12 Company acquired by Dollar Tree, Inc. (DLTR)
24 Wealth Management Research October 2019
Dividend Achievers Portfolio Past Specific Recommendation Disclosures
Buy Sell Price Dividend Achievers Ticker Date Price Date Price 10/10
3M Company MMM 04/27/18 $196.77 — — $152.31 AT&T Inc. T (A) 11/01/05 $23.67 — — $37.42 Automatic Data Processing, Inc. ADP 12/29/08 $33.21 — — $160.72 Chubb Limited CB 09/04/15 $100.28 — — $155.39 Costco Wholesale Corporation COST 11/21/18 $221.44 — — $297.14 Emerson Electric Co. EMR 11/01/05 $35.16 — — $65.05 Exxon Mobil Corporation XOM 06/12/09 $73.55 — — $68.25 International Business Machines Corporation IBM 02/07/14 $176.35 — — $141.13 Johnson & Johnson JNJ 12/29/08 $57.60 — — $129.06 Kimberly-Clark Corporation KMB 12/29/08 $49.41 — — $137.89 Microsoft Corporation MSFT (A) 02/24/15 $44.14 — — $139.10 NextEra Energy, Inc. NEE 08/14/09 $56.46 — — $232.00 Novartis AG Sponsored ADR NVS 12/13/12 $55.81 — — $85.93 United Technologies Corporation UTX 12/29/08 $50.63 — — $133.92 V.F. Corporation VFC 11/17/16 $52.80 — — $88.62 Kontoor Brands, Inc.1 KTB 05/23/19 N.A. 05/31/19 $29.20 $34.41 Alcon Inc. 2 ALC 04/09/19 N.A. 04/11/19 $55.69 $56.24 CVS Health Corporation CVS 02/19/16 $96.84 11/21/18 $75.81 $62.14 Procter & Gamble Company PG 11/01/05 $55.40 04/27/18 $72.41 $121.94 Genuine Parts Company GPC 11/13/09 $36.65 11/17/16 $94.57 $94.52 McDonald's Corporation MCD 12/31/08 $61.91 02/19/16 $116.93 $211.76 Chubb Corp.3 N.A. 09/03/08 $48.12 09/04/15 $119.84 — Realty Income Corporation O (A) 11/05/07 $27.82 02/24/15 $50.82 $78.73 Halyard Health Inc.4 N.A. 11/03/14 $16.33 11/11/14 $35.27 $39.23 CDK Global Inc.5 CDK 10/01/14 N.A. 10/02/14 $29.57 $45.58 C.H. Robinson Worldwide, Inc. CHRW 03/26/13 $58.84 02/07/14 $53.00 $84.33 PPG Industries, Inc. PPG 12/29/08 $19.41 03/26/13 $67.14 $115.66 Abbott Laboratories ABT 03/01/10 $26.05 12/13/12 $31.23 $80.14 Eli Lilly and Company LLY 11/01/05 $49.94 03/01/10 $34.37 $106.92 International Business Machines Corporation IBM 12/29/08 $80.60 11/13/09 $127.13 $141.13 MDU Resources Group Inc MDU 11/01/05 $21.59 08/14/09 $19.96 $27.72 Chevron Corporation CVX 11/01/05 $57.50 06/12/09 $71.40 $114.59 Nordstrom, Inc. JWN 12/29/08 $11.42 12/31/08 $13.28 $33.76 Abbott Laboratories ABT 11/01/05 $20.53 12/29/08 $24.75 $80.14 Air Products and Chemicals, Inc. APD 11/01/05 $53.18 12/29/08 $43.84 $214.67 Altria Group Inc MO 11/01/05 $17.25 12/29/08 $15.03 $42.98 Arthur J. Gallagher & Co. AJG 11/01/05 $29.39 12/29/08 $24.64 $87.47 Consolidated Edison, Inc. ED 11/01/05 $45.18 12/29/08 $38.01 $93.05 Diebold Nixdorf Incorporated DBD (A) 11/01/05 $35.96 12/29/08 $26.80 $9.14 Stanley Black & Decker, Inc. SWK 11/01/05 $47.88 12/29/08 $31.89 $140.43 Bank of America Corp BAC 11/01/05 $43.44 09/03/08 $32.58 $28.45 Freddie Mac FMCC 11/01/05 $61.29 07/10/08 $7.99 $3.43 Philip Morris International Inc.6 PM 03/31/08 N.A. 05/12/08 $52.14 $77.75 Citigroup Inc. C 11/01/05 $453.90 11/02/07 $365.89 $68.62 Kraft Foods, Inc.7 N.A. 04/02/07 $26.61 08/01/07 $32.15 $55.41
Sources: D.A. Davidson & Co., FactSet 1 Spin off from V.F. Corporation (VFC) 2 Spin off from Novartis AG Sponsored ADR (NVS) 3 Chubb Corp. was acquired by ACE Limited (ACE) 4 Spin off from Kimberly-Clark Corporation (KMB), now traded as Avanos Medical, Inc. (AVNS) 5 Spin off from Automatic Data Processing, Inc. (ADP) 6 Spin off from Altria Group Inc (MO) 7 Spin off from Altria Group Inc (MO), now traded as Mondelez International, Inc. (MDLZ)
25 Wealth Management Research October 2019
ESG Achievers Portfolio Past Specific Recommendation Disclosures
Buy Sell Price ESG Achievers Ticker Date Price Date Price 10/10
3M Company MMM 07/31/18 $212.32 07/12/19 $152.31 Alaska Air Group, Inc. ALK 06/17/19 $63.11 07/12/19 $64.88 American Water Works Company, Inc. AWK 07/31/18 $88.25 07/12/19 $125.05 Amgen Inc. AMGN 04/05/19 $195.00 07/12/19 $198.68 AT&T Inc. T (A) 07/31/18 $31.97 07/12/19 $37.42 CVS Health Corporation CVS 07/31/18 $64.86 07/12/19 $62.14 HCP, Inc. HCP 07/31/18 $25.90 07/12/19 $36.55 Intel Corporation INTC (A) 07/31/18 $48.10 07/12/19 $51.11 International Business Machines Corporation IBM 07/31/18 $144.93 07/12/19 $141.13 Johnson & Johnson JNJ 07/31/18 $132.52 07/12/19 $129.06 Kimberly-Clark Corporation KMB 07/31/18 $113.86 07/12/19 $137.89 Linde plc1 LIN 10/31/18 $163.46 07/12/19 $191.23 Microsoft Corporation MSFT (A) 07/31/18 $106.08 07/12/19 $139.10 PNC Financial Services Group, Inc. PNC 06/17/19 $136.36 07/12/19 $138.42 Prudential Financial, Inc. PRU 07/31/18 $100.91 07/12/19 $87.67 QUALCOMM Incorporated QCOM (A) 07/31/18 $64.09 07/12/19 $74.97 S&P Global, Inc. SPGI 07/31/18 $200.44 07/12/19 $250.97 United Parcel Service, Inc. Class B UPS 07/31/18 $119.89 07/12/19 $115.28 V.F. Corporation VFC 10/22/18 $73.00 07/12/19 $88.62 Walt Disney Company DIS 07/31/18 $113.56 07/12/19 $129.34 Invesco Ltd. IVZ 07/31/18 $26.99 06/17/19 $20.30 $15.35 Target Corporation TGT 07/31/18 $80.68 06/17/19 $86.21 $110.57 Kontoor Brands, Inc.2 KTB 05/23/19 N.A 06/04/19 $28.76 $34.41 Merck & Co., Inc. MRK 07/31/18 $65.87 04/08/19 $80.89 $83.76 Praxair Inc.3 N.A. 07/31/18 $167.50 10/31/18 $163.46 —
Sources: D.A. Davidson & Co., FactSet 1 Received following the merger of Praxair Inc. and Linde AG 2 Spin off from V.F. Corporation (VFC)
3 Merged with Linde AG
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