ABC American-Value Fund

Objective

ABC American-Value Fund searches out fundamentally attractive American common shares. The investment objective of the Fund is to seek long‐term capital appreciation by investing primarily in a diversified portfolio of American equity securities. While using the same investment techniques as our two Canadian ABC Funds, the American market due to its sheer size provides us with extensive value opportunities.


Top Ten Holdings

  • Broadcom Ltd.
  • Microsoft Corp.
  • SVB Financial Group
  • O’Reilly Automotive Inc.
  • First Republic Bank
  • Apple Inc.
  • Visa Inc., Class A
  • MasterCard Inc., Class A
  • The Boeing Co.
  • The Home Depot Inc.

As at December 30, 2016

Sector Breakdown

Geographic Breakdown

 

Holding Commentaries

Apple Inc. (AAPL)

The Apple iPhone 7 was released on September 16, 2016, and early data looks promising. iPhone 7 demand appears to be tracking ahead of expectations, led by a strong consumer reception and aggressive carrier promotions in the US, China and other markets. Analysts have raised their expectations for iPhone shipments for the balance of 2016 while TSMC, the manufacturer of the iPhone 7 processor, stated “high-end smartphone demand is better than we previously expected”.

Furthermore, a Goldman Sachs survey showed that in terms of holiday purchase intentions, the iPhone 7 is the top consumer electronic product. More importantly, supply has not yet caught up with demand, especially with the higher-priced Plus model.

Additionally, safety issues with Samsung’s Galaxy Note 7 have resulted in the company halting sales and production of the device. This is an incremental positive for Apple, with one analyst estimating Apple has the opportunity to gain 8 million unit sales, which would lead to a higher smartphone market share and expansion of the iOS user base.

SVB Financial Group (SIVB)

On October 20th, ABC Funds holding, SVB Financial Group, reported third quarter earnings of $2.12 per share, topping analysts’ estimates of $1.73. SVB is the holding company for Silicon Valley Bank, a California based commercial bank serving clients in the technology, life sciences, clean technology, venture capital and private equity segments. SVB’s better than expected results were fueled by consistent growth in loans and deposits, a rise in net interest income and margins, and a decline in provisions for loan losses. Moreover, given that there has been considerable speculation of an imminent U.S. Federal Reserve interest rate increase, SVB will likely be a beneficiary of a rising interest rate environment. In fact, on the earnings conference call, SVB’s CFO, stated that a 25 basis point increase in rates could add $25 to $28 million to the bank’s net income. Overall, given its strong balance sheet and growth potential, we believe that SVB Financial Group is well positioned for the balance of 2016 and into 2017.

© 2017 I.A. Michael Investment Counsel Ltd. All right reserved. Design by New Design Group.