Sunday, April 19, 2015

'The Letter' -Q1 2015

Dear Friends-

Investments at MWS Capital advanced in the first part of 2015, favored by our strategy of investing in businesses with lasting value. We achieved these results in a neutral U.S. market, which is digesting the drop in oil prices, the strong U.S. dollar and tepid forecasts for earnings growth. Nonetheless, our investments have overall done better than the indices, which do not have broad earnings momentum. Success this year lies beyond the crowd and in unique investments with a global perspective.

Disney and Starbucks, our two largest growth holdings, have had outstanding share price performance— 15% between the two. We have owned both for years, validating our strategy of not disturbing seasoned investments in immensely profitable All-American franchises. Of course, not every stock performed equally; transportation stalwart UPS declined 12%, paring its 120% gain over the last five years, amidst a pullback in transportation stocks. With a 3% dividend and strong cash flow, we are unwavering in UPS’s long term value even if the market is voting against it so far this year. Disney, Starbucks, and UPS are still way ahead of the market— +5.65% combined.

It is taking time for cheap oil to translate into higher profits, even in the transportation sector. The sudden drop has vexed industrial company boardrooms conditioned to hedging high oil prices, as well as those who have benefited from the U.S. energy boom, such as companies producing heavy equipment destined for oil fields, or moving railcars of crude to refineries. Ironically, this situation favors our investments in our largest energy holdings, Exxon and Chevron, which can now build reserves cheaply while paying large dividends of 3.7%, nearly twice the yield of the U.S. 10-year Treasury. We think that is a great value proposition— owning financially strong oil majors who can build reserves when prices are low, as well as paying a nice dividend in the meantime.

If energy is 2015’s contrary investment, last year it was Europe. Our European investments, 15% of our holdings, have achieved strong results. Our top five, which include Roche, “German” Merck and Maersk, have risen 12.5% on average. This is net of the strong dollar versus the Euro; our investments have appreciated more in Euros, and the German market has been one of the best performers worldwide. We take the position that the weaker Euro creates a cushioning, long term “earnings bank” intrinsic to our European holdings, that will be translated back to us in stronger Euros and earnings. New additions include Daimler and Airbus, each of which have raised business forecasts.


Our main group of ten smaller companies, an eclectic mix ranging from trucker Heartland Express (down this year- there’s that fuel cost conundrum again) to Snap-on Tools, to Estee Lauder in makeup, to this year’s runaway favorite, Churchill Downs, are up about 1.9% in the aggregate.


What seems to be the norm these days, persistent low interest rates, has given us positive results in our typically higher earning fixed income investments. These are allocated among corporate bonds, preferreds, global bond funds, and individual municipal bonds. We prefer credit over interest rate risk, i.e. taking advantage of relatively higher yields offered by certain borrowers, because there is currently a negative term structure. This means that investors are not requiring extra interest to lock up their funds for longer rather than shorter periods. This is contrary to investment logic, since rate and inflation risk increases over time. Therefore, we have intermediate exposure of about 7 years. Our fixed income investments have already returned over 2% as we start the year.


Which bring us to the biggest story so far this year, the blockbuster merger between Kraft and Heinz. Our widely held investment in Kraft vaulted 45% in three days. I am very pleased that so many of our clients benefited from this merger orchestrated by Brazil’s richest man, Jorge Lemann, and Warren Buffett. We believe the fact that a locally based company could be worth so much more is the correct narrative about the high potential value of the businesses we own. We do not agree with entrenched economic skeptics, nor do we join the blind indulgence in index funds and ETFs, only to get out when Apple or biotechnology stocks fail to deliver the kind of returns that they have enjoyed during the last three years.

On Good Friday stock futures fell sharply in a brief holiday session after a tepid employment report. Did Buffett call off the merger between Kraft and Heinz?  Did oil stop flowing?  Did Starbucks stop selling lattes? No! Monday morning the markets reversed and bounded higher, handing big losses to traders who overreacted to the employment report. The lesson here is that investments should be based on businesses, not on computer trading models driven by Twitter feeds. This distinction is lost in today’s herd mentality environment.  Instead of being preoccupied with what others are doing, we humbly invest in high quality businesses which will prosper in the long run. With patience, we have found that these goals are eminently achievable and create lasting income and strong growth.

Matthew Shapiro
MWS Capital Consultants LLC
April 2015

Personalized Investing, Planning and Consulting

Stocks, Bonds and Mutual Funds for a Lifetime

Disclaimer— Investing involves risk and past performance is no guarantee of future results.  Opinions in this report are that of MWS Capital and we do not represent that the information is accurate or complete, and is for informational purposes only.  Before investing consider your objectives, ability to take risk and our expenses. Performance presentations provided by us are not in and of themselves a basis of selecting our advisory services, or a guarantee of future results.   Read our ADV II form carefully. Investments in funds, stocks and bonds are not bank deposits nor insured by the FDIC or other agency.

Monday, March 9, 2015

MWS Capital Consultants LLC

MWS Capital provides comprehensive investment counsel along with access to a wide range of investments and services that help us serve the needs of our clients. Client accounts enjoy the security of independent custodian and account services through the leading provider of trading, custody, and brokerage services to registered investment advisors, trust institutions, and third-party administrators. MWS Capital does not offer its services to residents of states outside of Illinois.



Matthew Shapiro is the founder of MWS Capital Consultants LLC, and advocates for investors and the growth of their wealth.  He has shepherded funds with his vision and timeless approach since founding MWS Capital in 2003.  Matt is guided by a long term philosophy that focuses on our economy and high quality investments.

Matt has set himself apart from sales driven advisory strategies, and articulates one of the few responses distinctly opposed to the short term mindset that preoccupies brokerage firms and other advisors.  Above all, MWS Capital is dedicated to generational investing on behalf of its clients.

Matt's inspiration and eye for quality drives his positive style in long term holdings of select stocks, bonds and funds. MWS Capital's core clients include prominent Chicagoans, professional couples, retirees and successful business owners. Matt is also strong with successful and independent clients who favor MWS Capital's personal approach. Most of all, Matt especially enjoys building long term accounts for everyday hard working people.

MWS Capital's story started with Matt's financial career as an Economics student at Rutgers College in the early nineties. During this time he opened his first brokerage account at AG Edwards and eventually, Matt started a career as a stock options trader on the American Stock Exchange, then moved to Chicago to trade on the Chicago Board Options Exchange. Ultimately Matt devoted all of his time to his clients and their investments at MWS Capital.


Mr. Shapiro's market views are featured as a continuing guest on the nationally syndicated television show First Business, as well as both CBS and WGN talk radio in Chicago.