Trade Rationale

We exited Accenture as advances in AI, once a meaningful tailwind to our thesis, have become what we expect will be a durable and accelerating headwind. We initiated the position in January 2015 at approximately $89 per share, with a thesis centered on the long-term shift toward outsourced services and consulting demand driven by the complexity of migrating from on-premises infrastructure to the cloud.

We exited our position in Novo Nordisk due to impairment of the investment thesis. We initiated our first position in October 2014 at a split-adjusted price of approximately $23, when our thesis centered on the company’s strong competitive position in diabetes treatment and the substantial, growing population of underpenetrated patients. At the time, the opportunity was supported by both insulin and early GLP-1 therapies, though the thesis was primarily driven by the broader expansion opportunity within type 2 diabetes.

On December 30, we exited our position in Diageo (DEO) and initiated a 1.25% position in NetEase (NTES). This reallocation reflects evolving global consumer dynamics, including the expansion of the global middle class alongside aging populations in developed markets. Younger consumers are increasingly moderating alcohol consumption and reallocating discretionary spending toward digital entertainment, particularly online gaming.

Two portfolio companies, DuPont de Nemours and Honeywell, recently completed previously announced spins of certain businesses into separate publicly traded companies. Alongside these actions, we increased our weight in each of the new companies while also adjusting the weight of DuPont de Nemours to reflect its lower post-spin weight. We did not alter our weight in HON, as the size of the spin relative to the remaining company was not significant enough to materially impact the position weight.

Solstice Advanced Materials is the result of Honeywell’s spin-off of its Advanced Materials segment. The company holds advantaged positions across several end-markets with strong exposure to multiple long-term secular tailwinds.

We added Waste Management at a model weight of 2.50% due to the company’s entrenched market position, inflation-resilient business model, and upcoming acceleration in free cash flow following a multi-year investment cycle.

 We rebalanced Novo Nordisk back up to its model weight of 3.75%. We believe that following the substantial downdraft, its valuation is extremely compelling, even when revising down growth expectations....

 Our decision to exit Amgen was paired with our rebalance of NVO, in part to offset the increase in Health Care sector exposure. With multiple major products facing increased competition and/or facing LOE (loss of exclusivity) over the next few years—such as Prolia, Enbrel, and Otezla—we don’t believe that AMGN’s pipeline is robust enough to offset these revenue declines....

 We added Meta Platforms at a 2.50% allocation due to our improved assessment of the company’s prospects. This addition has meaningfully reduced our prior underweight position, although the 2.50% allocation remains below META’s weighting in the Russell 1000.  

The stock market is highly unpredictable, and trying to time the market by actively trading in an attempt to capture short-term gains can be a challenging and potentially costly strategy. 

The Brookmont Investment Team discusses the expected recession, labor tightness affecting fed policy, the reopening of China, and looking at the 2023 equity markets. 

The Federal Reserve continues there hawkish actions and narratives due to the labor market while value stocks present long-term investors with attractive valuations.

Dividend Growth Stocks display strong pricing power by having the ability to pass along costs to their customers and improve their margins through efficiency improvements brought on by technology.

Core inflation has peaked and the ongoing labor shortage might provide the necessary cushion for a soft landing

Inflation, Resurgence of COVID Lockdowns in China, and the changing of supply chains. 

The Brookmont research team discusses the secular and cyclical drivers for the bullish sentiment for the semiconductor industry

In this type of environment, it is important to still keep fundamentals in mind and focus on quality companies that produce growing cash flows, as these companies weather volatility in a more efficient manner than the overall market.

3rd Quarter 2021 firm commentary 

Inelasticity of Demand and Pricing Power Reduces Inflationary Pressures

The Great Lockdown resulted in a 31.4% decrease in annualized US real GDP in the second quarter. This, however, marked the bottom of the recessionary trough with real GDP rebounding 33.4% in the third quarter.

The work from home displacement caused by the Covid-19 pandemic has led to a peak in the Price to Earnings ratio of the Russell 1000 Growth...

During the 2nd Quarter of 2020, the market........

The COVID-19 lockdowns and zero commission brokerage accounts.....

When searching for “quality” long-term investments, some of the most important and easily quantified measurements are those....

The first four days of the week of March 23rd.....