HOLIDAY 2020: A DIFFERENT CHEER - THE MONTHLY RESEARCH CONFERENCE CALL Wednesday, November 4, 2020 11:00 a.m. ET - Argus Research
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HOLIDAY 2020: A DIFFERENT CHEER
THE MONTHLY RESEARCH CONFERENCE CALL
MODERATOR:
Jim Kelleher, CFA
Director of Research
Wednesday, November 4, 2020
11:00 a.m. ET
61 Broadway • NYC, N.Y. 10006
Telephone: (212) 425-7500WHAT’S NEW AT ARGUS?
Holiday 2020: A Different Cheer
• John Eade, President of Argus
• Chris Graja, CFA, Senior Analyst
• Stephen Biggar, Director of Financial Research
Argus Quick Notes
• Communication Service stocks
• New Coverage stocks
• The iPhone Ecosystem
• Global Dividend Investing
• Find these on the homepage of our website
Argus Dividend Growth Portfolio
• Dividend Income: important element of total return
• 1930-2012: dividends accounted for 42% of S&P 500 total return
• Prefer high dividend growth over high yield, which may be at risk
• Dividend Growers: strong cash flows, clean balance sheets
• Find our Theme Portfolios under Portfolio Strategy on our website
Sector Podcast
• Weekly Sector Commentary
• Recent topics include Energy, Healthcare
• Find it on the site: Home Page, Theme Research, Conference Calls
-2-MACRO FORECASTS
REAL GDP W/FORECASTS (%) TREASURY YIELD CURVE (%)
40 3
30 Year-Ago Current 6-Month Forecast
20
2
10
0
-10
1
-20
-30
Source: Bureau of Economic Analysis, Argus Research Corp.
-40 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20E 3-Mo bill 2-Yr Note 5-Yr Note 10-Yr Bond 30-Yr Bond
S&P 500 QUARTERLY EARNINGS GROWTH MARKET SECTOR DISTRIBUTION - PERCENT OF S&P 500
100% Sectors in Green are Recommended Overweight; Blue are Marketweight; Red are Underweight
80% Communication Services
Basic Materials
60% Utilities
Consumer Discretionary
40%
Industrial
20% Consumer Staples
Energy
0% Healthcare
Real Estate
-20%
Financial Services
-40% Technology
'00 '02 '04 ' 06 '08 '10 '12 '14 '16 '18 '20E
0% 5% 10% 15% 20% 25% 30%
-3-MARKET PERFORMANCE
DATA AS OCTOBER 30, 2020
MAJOR INDEX SECTOR
Technology
Nasdaq Composite
Consumer Discretionary
Growth Stocks (Wilshire Large Growth) Communication Services
Materials
Barclays Bloomberg US Bond Index
Consumer Staples
S&P 500 Health Care
Utilities
DJIA
Industrials
Russell 2000 Real Estate
Financials
Value Stocks (Wilshire Large Value) Energy
-20% -10% 0% 10% 20% 30% -60% -40% -20% 0% 20% 40%
GLOBAL EQUITY MARKETS
China
US
DJ World Index
Japan
India
Canada
Mexico
Brazil
Euro Zone
UK
Russia
-40% -30% -20% -10% 0% 10% 20% 30%
-4-HOLIDAY 2020: A DIFFERENT CHEER
Agreement
• Running a business (or household) has rarely been more difficult
• COVID has accelerated massive changes
• There will be big shifts in spending this holiday
• Super-low interest rates have huge investment implications
Less Agreement
• Will it be a “Good” or “Bad” holiday?
• How can we measure it?
• When will things be “Normal” again?
• The value of high-quality dividend payers
-5-TEN INVESTMENT THEMES
FOR THE HOLIDAYS
Uncertainty = Opportunity
Happy, Healthy, Home (and Pet)
Valuation Still Matters
Corporate Values Matter
Normalcy and Nostalgia are Good
Innovation is Better
The Big Will Get Bigger
Last Mile Matters - Delivery, Curbside, BOPIS
The Top Gifts Will be “Goods” (not “Experiences”)
Who Will Emerge Stronger?
-6-STOCK PICKS
5 Top Stock Picks:
• Lowe’s (LOW)
Target: $200
• Home Depot (HD)
Target: $320
• Walmart (WMT)
Target:$157
• Procter & Gamble (PG)
Target: $160
• Colgate-Palmolive (CL)
Target:$90
2 Out-of-Consensus Picks:
• Coca-Cola
Target: $58
• TJX
Target: $65
-7-PAYMENT TRENDS
Pandemic has accelerated a rapid shift to digital payments for online
purchases
Secular shift was already underway, with increasing use of credit/
debit cards over cash/checks for convenience, safety and reward
program benefits
Increasing merchant acceptance including for lower-price purchases
Trend has benefited a variety of card issuers, processors and fin-tech
companies
-8-BENEFICIARIES OF
DIGITAL PAYMENT TRENDS
PayPal (PYPL)
• Increasing merchant acceptance of online, in-store, in app solutions
• Pay and be paid
• Venmo person-to-person
Visa (V), Mastercard (MA)
• At the core of secular shift to digital payments
• Potential entry into China
• Cross-border transactions offset due to sluggish int’l travel
-9-BENEFICIARIES OF
DIGITAL PAYMENT TRENDS
Square (SQ)
• Rapid adoption of mobile payment devices by smaller merchants; Cash App; Bitcoin
Fidelity National Information (FIS), Global Payments (GPN)
• Fin-tech names that are the backbone of payment technology networks while also offering software
solutions
These companies benefit from digital payment growth
without credit risk
- 10 -SUPPLY CHAIN OPPORTUNITIES
Paper & Packaging
• Sector still struggling with pandemic
• But conditions improving quarter over quarter
• PKG our top Pick
Air Freight
• Back to revenue & earnings growth
• Focus on margins
• FDX, UPS on BUY list
Trucking
• One of top-performing sectors in Industrial Group
• Earnings recovering, benefitting from focus on domestic supply chains
• Top picks are ODFL, JBHT
- 11 -DISCLAIMER The Argus trademark, service mark and logo are the intellectual property of The Argus Research Group, Inc. Investing in any security or investment strategy discussed in this presentation may not be suitable for you and it is recommended that you consult an independent investment advisor. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus officers, employees, agents and/or affiliates may have positions in funds or stocks discussed in this presentation. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. Argus shall accept no liability for any loss arising from the use of this presentation or the materials contained in this presentation.
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