Our trading last quarter included bringing our sector exposure closer to market weight, making some opportunistic sales and purchases, and optimizing our portfolio for volatility and end-of-year capital gains.

We purchased a position in Proctor and Gamble (tkr: PG), bringing us close to market weight in the consumer staples sector. The company has shed over half of its brand portfolio in the last couple years to focus on the 65 brands that make up 90% of its revenues. Management will direct the savings from these divestitures toward product development and marketing, which we believe will drive higher revenues and expand margins.

We sold Whole Foods Market (tkr: WFM) because its same-store sales have deteriorated, which management forecasts will continue. Results at 365, its value-oriented stores targeting younger shoppers, have been mixed and are therefore unlikely to compensate. We believe that Whole Foods has become a victim of its own success. The entrance of many close competitors means that it has struggled to maintain competitive pricing. In addition, Whole Foods ended its co-CEO structure, which we think will distract management from operations and cloud its already opaque strategy. The stock jumped on acquisition rumors, which we took as an opportunity to sell.

To replace our Whole Foods position, we purchased Constellation Brands (tkr: STZ). It is the third-largest producer and marketer of beer for the US market. It also sells the highest volume of imported beers, and is the world’s leading premium wine company. 90% of its sales are derived from the United States, which we found attractive given the strength of the domestic economy. Constellation Brands is distinct from our other beverages holding, Diageo (tkr: DEO), which focuses on spirits and has more international sales. We believe they make a well-diversified pair. Constellation Brands’ stock suffered a post-election downturn due to perceived risks the incoming Trump administration poses to Mexican operations and imports. We believed the concerns were overstated and took the opportunity to buy the stock.

We also purchased a position in Hormel Foods Corp. (tkr: HRL), which manufactures a variety of food products. Its original focus was commodity meats, although it has expanded its brand portfolio over the years to include names like Spam, Skippy, Muscle Milk, Applegate and Justin’s Nut Butter. It is growing its reach into the organics business via acquisition, which we think is an appropriate strategy. The stock has underperformed year-to-date because avian influenza negatively affected its turkey inventory and sales. We think that will not be a long-term issue and took the price decline as an opportunity to buy the stock.

The combined purchases of Constellation Brands and Hormel increase our exposure to the beverages and food manufacturing industries, respectively; bring our exposures within the consumer staples sector roughly in line with the market (excluding the tobacco segment), and bring the sector overall closer to market weight.

We doubled our Allergan (tkr: AGN) position in November and sold the first lot in December. The stock did not perform as we had hoped following our initial purchase in August, so we decided to take a capital loss to offset clients’ gains this year. We continue to believe in Allergan’s ability to generate long term value, so the purchase and subsequent sale leave us with a position roughly equal in size to the original.

We sold half of our position in Silicon Valley Financial Group (tkr: SIVB) to reduce volatility in our portfolio before the election. Our assessment of the volatility was correct, but the steepness of the post-election market rally caught us by surprise. We still believe in the stock, which in an improving regional economic environment tends to surprise on equity warrant and investment gains. We kept a 1% position from which we benefited substantially.

Individual investment positions detailed in this post should not be construed as a recommendation to purchase or sell the security. Past performance is not necessarily a guide to future performance. There are risks involved in investing, including possible loss of principal. This information is provided for informational purposes only and does not constitute a recommendation for any investment strategy, security or product described herein. Employees and/or owners of Nelson Roberts Investment Advisors, LLC may have a position securities mentioned in this post. Please contact us for a complete list of portfolio holdings. For additional information please contact us at 650-322-4000.