This week the only significant movement in our portfolio was a 13% gain in Discovery Communication (DISCA). This is mainly due to billionaire John Malone’s continued interest in Discovery stock.
In this holiday season, retail has performed better than consensus estimates (+0.8% MoM vs. +0.3% consensus estimate), mainly on the non-store retail side. We also have some preliminary data on foot and web traffic of retail stores during the Thanksgiving week. Walmart, Target and Best Buy seemed to have the highest foot traffic on Thanksgiving week according to data provided by Skyhook. Kohl’s also has seen a sudden spike in foot traffic lately. We do not have any of these stocks in our portfolio, but I am watching Target closely considering its recent acquisition of Shipt, a same-day delivery application similar to instacart.
Weekly Updates
Gilead (GILD)
In the previous update, I mentioned that Gilead is not a conventional value stock, and there are uncertainties in its ability to increase its long-term revenue from its current pipeline of drugs—primarily due to its declining market share in HCV space. However, our bet was on its exceptional management who are focused on strategic acquisitions. Gilead has invested in Galapagos because of its drug Filgotinib, a drug for rheumatoid arthritis which is in Phase 3 clinical trial. This month, we have seen a favorable partnership between Gilead and Galapagos further extending Gilead’s right to commercialize filgotinib to Europe. On the lymphoma side, Gilead recently announced its acquisition of Cell Design Lab, further strengthening its foothold in the emerging CAR-T cancer therapy. HOLD.
Walt Disney (DIS)
I recommend continuing to hold Disney through uncertainties about the regulatory approval of the $52.4 billion Disney-Fox deal. The deal will include an additional revenue of $19 billion from the acquired assets along with helping Disney to execute its online strategy by having a complete bundle of branded contents. HOLD.
LCI Industries (LCII)
In the last issue, I recommended LCII considering the continued positive trend in the RV industry. It was a good business trading at a slight discount to its fair value. As the price of the stock has climbed closer to its fair value, I change my recommendation from buy to hold. HOLD.
Fedex (FDX)
FedEx has hit its fair value of $248 per share, and I recommend to sell this stock. SELL.
Closing prices on December 20, 2017.
