US Financials Excel in July


For US moats, the mixed results of healthcare companies proved to be a hurdle in July. 

For the Month Ending 31 July 2017

Performance Overview

US moats maintained their YTD outperformance (4.22% versus 1.21%), despite retreating slightly in July. For the month, the Morningstar® Wide Moat Focus IndexTM (MOAT Index) trailed the S&P 500® Index falling 3.04%versus the market’s fall of 1.95%.

Performance attribution: Healthcare fatigue

The US Moat Index's healthcare allocation delivered mixed performance and finished July relatively flat. Pharmaceutical and biotech names fared well during the month led by Gilead Sciences, Inc. (GILD US, +7.50%), and Biogen, Inc. (BIIB US, +6.72%). By contrast, medical distributors and pharmacy benefits managers such as Patterson Companies, Inc. (PDCO US, -10.60%) and Express Scripts (ESRX US, -1.88%) have struggled recently.

In other sectors, several financials firms excelled in July led by investment manager T. Rowe Price Group (TROW US, +11.47%) which boasted record levels of assets under management. Wells Fargo & Company (WFC US, -2.65%) was the only financial company to post negative returns in July, as it continues to be dogged by the fallout from overly aggressive past sales practices. Consumer discretionary was the top detracting sector for the US Moat Index in July given poor results from L. Brands, Inc. (LB US, -13.92%). Victoria's Secret, L. Brands' top product line, saw second quarter sales decrease by 12%.

Important Disclosures

This commentary is not intended as a recommendation to buy or sell any of the named securities. Holdings will vary for MOAT and MOAT Index.

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Published: 09 August 2018