Caldwell North American Equity Strategy – Monthly Update June 30th, 2014

Portfolio Additions

No new purchases in June.

Portfolio Deletions

Tyson Foods (TSN-us)

Reason we sold the stock: Tyson announced it will be buying Hillshire brands, a strong player in the packaged breakfast foods category. While the purchase is consistent with Tyson’s strategy to expand its packaged foods segment, our concern is around the price paid given there was a bidding war for Hillshire. Tyson’s winning bid valued Hillshire at $8.6 billion, or $63/share. This was 20% above Tyson’s initial bid and a 70% premium to Hillshire’s closing price prior to the start of the bidding war. Tyson’s final bid pushes earnings accretion beyond a year, which increases execution risk, in our view.

Company Updates: A Few Highlights

Oracle (ORCL-us)

Oracle reported results that were slightly shy of analyst expectations. We look for new products to drive stronger revenue growth and margins over the next several quarters. Oracle also announced it will be acquiring point-of-sale provider MIRCOS systems for $5.3 billion. This expands Oracle’s product offerings in the hospitality and retail segments and introduces the restaurant sector as a new client base. The company trades at a compelling valuation and is backed by strong cash flow as it transitions to cloud-based solutions.

CanElson Drilling (CDI-t)

Energy is the best performing sector in Canada year to date. Drilling activity remains strong and licensing is up double digits, which points to continued strength for the rest of the year.

We expect to have more news next month as companies begin reporting Q2 results in mid July.

As always, feel free to contact us with any questions.
Jennifer Radman │ VP & Portfolio Manager │ jradman@caldwellinvestment.com