John Stephenson, president and CEO of Stephenson & Company

Focus: North American large caps
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MARKET OUTLOOK
The common wisdom that markets are up because of Trump’s pro-growth policies does not hold up to scrutiny. Small caps have stalled and global markets are inflating because economic growth is stronger, not because of potential policy changes. The TSX underperforms the S&P 500 every single year when there’s not a commodity bull. Investors should look to large global equities in the consumer and tech sectors to boost their performance.

TOP PICKS

BUY: AMAZON.COM (AMZN.O) – Last purchased on April 12, 2017 at $892.40

• Online retail is in its infancy and will likely continue to grow
• Amazon should continue to take share in the online retail segment
• Additional revenue growth opportunities from divisions such as Amazon Web Services
• Likely future margin expansion possibilities
• A great management team

SHORT: IBM (IBM.N) – Last shorted on May 24, 2017 at $151.76

• The company has been pulling rabbits out of the hat for years; they are running out of rabbits
• Their earnings have benefited from lower taxes and nonrecurring intellectual-property revenue
• 20 straight quarters of declining sales

SHORT: MICHAEL KORS (KORS.N) – Last shorted on June 6, 2017 at $35.10

• Demand has continued to deteriorate
• Management has had to reset its earnings outlook (and brand distribution)
• Operating margins are declining with elevated growth investments, increased promotional activity and sales deleverage
   

PAST PICKS: APRIL 26, 2016

CONSTELLATION BRANDS (STZ.N)
We sold Constellation Brands on November 3, 2016 at $162.11. We liked the name but consumer names had risen a lot in value.

• Then: $156.25
• Now: $185.83
• Return: +18.93%
• TR: +20.48%

DISCOVER FINANCIAL SERVICES (DFS.N)
We sold Discover Financial Services on May 15, 2017 at $60.15. Recently, there has been a rotation out of financial names.

• Then: $57.07
• Now: $58.69
• Return: +2.83%
• TR: +5.44%

SHORT: GUESS? INC. (GES.N)
We are still short Guess? Inc.

• Then: $18.42
• Now: $11.27
• Return: +38.81%
• TR: +33.44%

TOTAL RETURN AVERAGE: +19.78%