Allocation Model – Aggressive
I am making three changes to the allocation model for the aggressive list. Cerner will likely encounter some headwinds from hospital spending as the Affordable Care Act undergoes changes. While we are still in the dark as to what President-Elect Trump has in mind for Obamacare, I don’t think it will materially effect spending for information technology, if at all. However, given the uncertainty and lower guidance by management, I am taking down CERN from 9% to 8%. Applied Materials, which will report earnings on Thursday, has had a nice run and I expect further growth ahead for the maker of semiconductor equipment. The company’s solar panel business, however, will be taking a back seat in a new administration. Unless we get a surprise on Friday, I view the shares as fully valued and, hence, I am lowering Applied Materials one percentage point to 8%. On the plus side, I like what I see in the recent upward momentum for transportation and will use the new allocation downgrades to increase east-coast rail and intermodal carrier CSX from 8% to 10%. For now, I am maintaining the allocations for the other more speculative choices.