Kevin Simpson's Portfolio Moves: Buying FedEx & SLB, Selling Merck Call

Investment Strategy: Industrials and Energy

• 💡 Kevin Simpson is initiating a new buy in FedEx, viewing it as a strong industrial name with increasing efficiency and a 10% dividend increase over the past three years.
• 🎯 Despite FedEx's year-to-date 8% gain and 52-week high, Simpson believes it will continue to appreciate, citing its ability to handle Amazon packages and management deserving a premium.
• 🚀 Simpson also highlights a new buy in SLB (Schlumberger), up 15.5% year-to-date, as part of a broader theme in industrials and energy that performed well in 2022.
• 📈 He favors SLB due to its valuation below historical averages, revenues at 7-year highs, and its position as a beneficiary of a broader market trend.

Market Sentiment and Energy Sector

• ⚠️ There is significant bearish sentiment on oil and the energy sector, with a Goldman Sachs survey showing the highest number of bearish institutional clients since 2020.
• ⚡ Despite bearish sentiment, the potential for better global growth or supply disruptions (e.g., Iran) suggests asymmetric risk for crude oil prices to move higher.
• 📊 Within energy, the refinery segment is seen as a strong area for potential profit, with companies like ExxonMobil having robust refinery businesses.
• 📉 However, companies in the E&P (Exploration & Production) sector and mineral rights are sensitive to oil prices, and a White House push for $50 oil could dampen profitability.

Specific Stock Analysis

• 🧩 Wabtec (WAB) is liked for its role in rebuilding the US manufacturing base, but potential mergers like Union Pacific buying Norfolk Southern could decrease equipment demand.
• 💰 Simpson sold a covered call on Merck (MRK), generating additional cash flow on top of the dividend, with the stock around $111 and the call expiring in two weeks.
• 💡 This move on Merck is proactive, as the company anticipates losing patent protection for Keytruda, leading them to pursue acquisitions like Revolution Medicines.
• 📌 Simpson entered Merck at $77 in April and is excited about its prospects, aiming to avoid having the stock called away while still benefiting from the call premium.