May 2020: HNW Equity Rebalance

by | May 1, 2020 | Rebalance Rationales

HNW Holdings Update

The HNW sleeve is designed to give equity exposure to a group of individual stocks that offer attractive prospects through a combination of yield, growth, quality, and reasonable valuations.

 Holdings as of 5/1/2020

 

Purchases

Fidelity National Information Services, Inc. (FIS) is a financial services technology company with a steady stream of recurring revenue. In 2019, FIS made a transformational acquisition of Worldpay, a payment service provider that offers shops online services for accepting electronic payments. Furthermore, FIS’ legacy business is among the largest core banking software providers for many large banks.

Simply put, we believe Wall Street under appreciates the strategic value of the recently announced Worldpay acquisition. The deal structurally changes the growth profile of the company essentially overnight on top of enhancing the margin profile as well. In short, we believe the deal makes a lot of sense and we expect the stock to re-rate higher once investors begin to fully appreciate this transformative combination.

 Sells

We’ve decided to sell Intel Corporation (INTC), the largest semiconductor maker in the world, as we lowered our overall growth rate for the name, bringing its “Yield + Growth” below our double-digit threshold. Thus, we decided to allocate into the faster growing FIS. Furthermore, from our perspective the stock appears to be already reflecting a lot of optimism as it trades with a valuation that is at the upper end of the historical range. Given this run, we decided to move on.

  

Disclosures

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