It was another solid week for the market, even remarkable when you consider how far and how fast the market has rallied in 2019. The most impressive part of the rally is how well the market has begun this year. This is the first time the market has rallied eight straight weeks at the start of the year since 1964. Friday’s session saw Technology come on strong, but it was led by Intuit (INTU) and Western Digital (WDC) and Xilinx (XLNX).
Auto dealer Copart (CPRT)) led Consumer Discretionary stocks, even as many of its rivals were hammered during the week.
S&P 500 Index | +0.64% |
Communication Services (XLC) | +0.94% |
Consumer Discretionary (XLY) | +0.54% |
Consumer Staples (XLP) | -0.48% |
Energy (XLE) | +0.29% |
Financials (XLF) | -0.15% |
Health Care (XLV) | +0.92% |
Industrials (XLI) | +0.66% |
Materials (XLB) | +0.43% |
Real Estate (XLRE) | +0.57% |
Technology (XLK) | +1.28% |
Utilities (XLU) | +0.62% |
Same Tide
There is an old saying about the same tide lifting all ships, and that has been the case for all investment classes in 2019. Crude oil continues to edge higher and has been among the best investments of the year. I continue to pound the table on small-cap names in the Russell 2000. It’s where all the grand slams trade these days.
Index/Asset | Feb 22, 2019 | Year to Date |
Dow Jones Industrial Average | +0.70% | +11.6% |
S&P 500 | +0.64% | +11.4% |
NASDAQ Composite | +0.91% | +13.5% |
Russell 2000 | +0.92% | +17.9% |
Dow Jones Transportation | -0.37% | +15.6% |
Philly Semiconductor Index | +1.08% | +18.1% |
Crude Oil | +0.19% | +22.7% |
There is still a fair amount of grumbling about the yield curve, which is this close to inverting. Keep in mind: in the past, inverted yield curves predicted recessions, but by an average of 18 months later. I think any hysterics around inversion has created a buying opportunity, as bears scream for the end is nigh.
Portfolio Approach
On Friday, we added another idea in the model portfolio to Consumer Discretionary, which brings it to a four weighting, matching the Industrials and Material sectors.
Make sure you understand our Portfolio Approach and our online position tracker. Check with your rep or research@wstreet.com.
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 4 | 1 |
Energy | Financials | Healthcare |
1 | 1 | 1 |
Industrial | Materials | Real Estate |
4 | 4 | 0 |
Technology | Utilities | Cash |
2 | 0 | 1 |
Today’s Session
Two Big Deals
GE is selling its Life Science business to Danaher for $21.4 billion ($21.0 billion in cash). It’s a great deal for both companies and shares of both are indicating higher.
Note: Danaher was once a mortgage company. Management adopted the “kaizen” Japanese business philosophy and has been reinventing itself for a couple of decades. Last year, Life Sciences became the largest biggest segment and enjoyed a sharp increase in operating margin.
Danaher (DHR) Revenue | 2018 in billions | 2017 In billions |
Life Sciences | $6.47 | $5.71 |
Diagnostics | $6.26 | $5.84 |
Environmental | $4.37 | $3.97 |
Dental | $2.84 | $2.81 |
Danaher (DHR) Op Margins | 2018 | 2017 |
Life Sciences | 19.0 | 17.6 |
Diagnostics | 17.2 | 14.9 |
Environmental | 22.9 | 23.0 |
Dental | 12.2 | 14.3 |
Spark Therapeutics is being bought by Roche for $4.8 billion. The Philadelphia based company is the first to receive approval for gene therapy. Its treatment for Luxturna, a rare form of blindness that affects up to 2000 US Patients, has unleashed a wave of excitement about additional applications.