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Day Hagan Smart Core Equity Strategy Update November 2026 (pdf)
Summary
We continue to own companies whose earning power, cash generation and competitive positions support their long-term value. October’s reports provided several reasons to maintain that conviction. Cloud demand accelerated at Alphabet and Amazon, ServiceNow expanded contracted business, and newer medicines drove growth at Merck and Bristol Myers Squibb. Financial services, payments and energy infrastructure supplied additional sources of earnings. The results also reinforced our discipline: growth must ultimately justify the capital required to produce it.
The portfolio contains 41 equity positions, representing 85.06% of the portfolio, alongside 13.86% in the Treasury-bill ETF BIL and 1.08% in custodial cash. Essex Property Trust was added at 2.00%. Mid-America Apartment Communities and VICI Properties were fully sold.
Strategy Update
Growth remains part of the value
Our process combines economic profitability, financial strength, cash generation, and valuation. A growing company can be an attractive value investment when the price understates its future cash flows. A low multiple alone is insufficient if those cash flows are deteriorating. We therefore assess what a business earns on its invested capital, how much additional investment growth requires, and what ultimately accrues to each share.
October brought several practical examples. BNY grew revenue faster than expenses, lifting earnings per share. Visa’s payments network produced revenue and adjusted earnings growth supported by transaction activity. Merck’s WINREVAIR sales and Bristol Myers’ Growth Portfolio supplied evidence that newer products are contributing meaningfully. These are identifiable business developments that support continued ownership, even when investors remain concerned about the outlook.
The AI trade is becoming a test of returns
The latest reports show substantial demand for AI infrastructure and applications. Alphabet’s Google Cloud revenue more than doubled, with TPU systems sales contributing to the increase, while Search revenue grew 12%. Amazon’s AWS revenue increased 39%. ServiceNow’s subscription revenue rose 21%, and current remaining performance obligations increased 20.5% on a reported basis. Those contracts and revenues provide firmer support for the investment case than product announcements alone.
The spending burden is also becoming more clear, and more of an issue. Amazon generated $168.3 billion in trailing-year operating cash flow but reported a $42.4 billion free-cash-flow outflow, primarily reflecting AI investment. Meta generated $32.8 billion in quarterly operating cash flow, yet capital expenditures including finance-lease principal reached $34.9 billion. Strong demand does not remove the need to earn an adequate return on those investments.
Our exposure spans infrastructure, monetization and implementation. Alphabet and Amazon sell computing capacity and services. Meta uses AI to improve recommendations and advertising. ServiceNow sells workflow automation, while Cognizant helps enterprises deploy and integrate technology. This gives us several ways to participate as spending moves into commercial use, although the holdings remain exposed to common changes in technology budgets and investor expectations.
Why we can remain constructive when prices fall
A disappointing share-price reaction can occur even when a company grows. Investors may have expected faster bookings, lower spending or stronger guidance. Our response is to test the assumptions behind the holding. If customer demand, competitive advantages and prospective cash flows remain sound, a lower price can improve the return available to a patient owner. A position being below its purchase price is neither a reason to sell nor a reason to defend it automatically.
Meta illustrates that distinction. Revenue rose 26%, supported by more advertising impressions and higher pricing. Yet, a $9.9 billion litigation charge depressed reported operating profit. Excluding that charge, operating income was approximately $22.9 billion. Those figures support the strength of its advertising business, while negative quarterly free cash flow and substantial future spending explain why investors may demand more evidence before awarding a higher valuation. The positive case rests on monetization already occurring and the potential to spread investment costs across a much larger revenue base.
ServiceNow offers a different case. Its $13.65 billion in current contracted revenue and 65% growth in AI net new annual contract value support continuing customer adoption. Cognizant’s adjusted earnings grew faster than revenue and its adjusted margin expanded, although quarterly bookings declined. We see reasons to retain exposure to enterprise AI adoption while monitoring contract conversion, profitability and cash generation.
Hershey and Bristol Myers also deserve a closer look below the headlines. Hershey’s earnings recovery and higher adjusted earnings outlook support the case for improved profitability, even as weak volumes require monitoring. Bristol Myers raised its revenue outlook and grew newer-product sales, while acquired research charges reduced reported and adjusted earnings. These facts give us specific grounds for patience, alongside clear measures by which to judge progress.
It is our view that Algorithmic trading, momentum strategies and volatility-driven reductions can significantly amplify selling after earnings. Where selling exceeds the deterioration in business value, we believe shares have a better chance of finding footing as subsequent results confirm demand, margins and cash generation. That is a conditional investment judgment, not a forecast that every decline will reverse. We will reassess a holding if the fundamental evidence weakens.
Portfolio positioning
The portfolio’s ten largest equity positions total 31.89%: Merck, Gartner, BNY, Salesforce, ServiceNow, Bristol Myers Squibb, Visa, Zoom, National Fuel Gas and Accenture. Technology remains the largest sector exposure. Health care, financial services, property income and energy businesses diversify the sources of earnings, while Treasury bills preserve flexibility to act when valuations become more attractive.
| Allocation | Weight |
|---|---|
| Information Technology | 31.00% |
| Financials | 14.48% |
| Health Care | 9.49% |
| Real Estate | 7.81% |
| Utilities | 4.14% |
| Communication Services | 4.78% |
| Consumer Staples | 4.94% |
| Consumer Discretionary | 3.35% |
| Energy | 3.26% |
| Materials | 1.81% |
| Treasury bills and cash | 14.94% |
Weights as of October 28, 2026. National Fuel Gas is grouped with Utilities and Owens Corning with Materials, consistent with the prior letter. Rounded totals may differ slightly from 100%.
October earnings updates
Below are our portfolio holdings that reported earnings in October. Growth rates are compare with the prior-year period unless stated otherwise. Adjusted earnings and AFFO are company-defined non-GAAP measures.
Alphabet GOOGL | Reported: October 28
Revenue rose 25%, Search grew 12%, and operating income increased 30%. Cloud demand supports the AI investment case, although hardware sales also contributed. Lower net income alongside higher operating profit warrants separating investment-related fluctuations from operating progress. Capital intensity remains an important valuation metric. We continue to hold because Search is growing alongside cloud adoption, giving Alphabet multiple ways to earn returns from AI. Its expanding operating profit provides evidence that investment is strengthening the underlying business.
Amazon AMZN | October 29
AWS revenue increased 39%, while operating income reached $28.1 billion. Cloud growth and retail efficiency support continued ownership. Heavy AI investment produced a trailing-year free-cash-flow deficit, however. The hold case depends on converting today’s capacity spending into durable earnings and future cash generation. We see two reinforcing sources of value: AWS can earn revenue from customers adopting AI, while more efficient retail operations can improve profitability across a much larger sales base.
American Tower AMT | October 27
AFFO per share rose 3.2% to $2.87, while property revenue increased 4.5%. Data-center cash revenue grew 16.3%, adding a growth driver beyond towers. Recurring infrastructure revenue supports the holding, although modest organic tenant billings growth and financing costs still warrant close attention. We value the combination of recurring tower income and faster data-center growth. Additional demand for digital infrastructure can expand earnings from existing assets, making disciplined investment and rising cash generation per share particularly important.
Ares Management ARES | October 29
Ares raised more than $31 billion in gross commitments and generated $524 million in fee-related earnings. Capital raised but not yet earning fees supports future management-fee growth. That embedded opportunity strengthens the holding case, provided deployment remains disciplined and underlying investment performance holds up. Management reported $691 billion in assets under management and invested $35 billion during the quarter. We see an opportunity for fundraising and subsequent deployment to expand recurring earnings across a broader investment platform.
Bristol Myers Squibb BMY | October 29
Revenue increased 7%, and Growth Portfolio sales rose 12%. Management raised its revenue outlook, supporting confidence in newer medicines. Acquired research charges weighed on earnings. Continued ownership rests on those growing franchises replacing revenues exposed to patent expirations, rather than overlooking the transition risk. Growth Portfolio revenue reached $7.7 billion, with contributions from Opdivo Qvantig, Breyanzi, Reblozyl, Camzyos and Opdualag. This breadth matters: the transition depends on several expanding franchises, giving us concrete commercial progress to evaluate.
BNY BNY | October 15
Revenue rose 12%, expenses increased 8%, and diluted earnings per share advanced 24%. Fee growth and operating efficiency support the holding’s earnings quality. The 38.5% pretax margin demonstrates scale benefits, although sequential earnings softened and deposit pricing remains a factor to monitor. We hold BNY because its financial infrastructure businesses can benefit from client growth without expenses rising proportionately. Fee revenue increased 12%, providing potential support that improved earnings reflect broader business activity as well as efficiency.
Blackstone BX | October 22
Blackstone attracted $63 billion of inflows and reported nearly $1.4 trillion in assets under management. Fundraising supports future fee revenues, while infrastructure and energy provide investment opportunities. The positive case rests on deployment and realizations, with liquidity and valuation risks requiring monitoring. We value its ability to attract capital across investment strategies and put that capital to work over time. New commitments can support recurring management fees before eventual investment sales generate additional performance-related income.
Cognizant CTSH | October 29
Revenue grew 4.6%, adjusted earnings per share increased 7.2%, and adjusted operating margin expanded. Enterprise AI implementation supports the opportunity. Quarterly bookings fell 7%, however. Continued ownership is supported by improving profitability and trailing-year bookings growth, with renewed order momentum an important next test. Financial Services revenue grew 12%, and trailing-year bookings reached $28.7 billion. We see a role for Cognizant as clients integrate AI into existing operations, with productivity improvements offering another avenue for earnings growth.
Chevron CVX | October 30
Chevron generated $16 billion in operating cash flow and $12 billion in free cash flow, while reducing debt. Strong refining performance and higher oil realizations supported results. The balance sheet and cash generation bolster ownership, although current commodity margins should not be assumed permanent. Quarterly debt reduction of $3.5 billion adds financial flexibility. We value that capacity to fund projects and shareholder distributions through changing energy markets, rather than relying solely on continued strength in oil prices.
Essex Property Trust ESS | October 27
Same-property revenue increased 3.0%, net operating income rose 3.1%, and core FFO per share grew 0.8%. Essex raised full-year guidance. These operating gains support the new position. Lower reported earnings largely reflected prior-year property-sale gains, while financing costs remain relevant to shareholder returns. We prefer assessing the rental business through property income and recurring earnings. Revenue growth across all regions, with continued Northern California strength, provides evidence supporting the allocation as management works to improve shareholder returns.
Goldman Sachs GS | October 13
Goldman earned $17.01 per share, compared with $12.25 a year earlier, and generated an 18.7% annualized return on equity. Strong profitability supports the franchise’s value. Earnings remain sensitive to market activity, making sustainable returns and capital discipline more important than extrapolating one quarter. Book value per share increased during the quarter. We hold the position for its capacity to earn attractive returns on shareholder capital, with retained profits providing a foundation for future growth and distributions.
Hershey HSY | October 29
Adjusted earnings per share more than doubled, and management raised its adjusted earnings outlook. Improving profitability supports recovery potential. Organic sales grew only 0.8%, with pricing offsetting weak volumes. The holding case requires margin gains to persist while consumer demand and unit sales stabilize. Tariff refunds contributed to earnings, so we do not extrapolate the full quarterly improvement. Brand investment and cost discipline offer a path toward sustainable profit growth if unit demand stabilizes and consumers absorb pricing changes.
JPMorgan Chase JPM | October 13
JPMorgan generated $15.3 billion in net income, with investment-banking fees up 14% and markets revenue up 15%. Diverse revenue streams and a 13.9% common-equity capital ratio support ownership. Credit costs and slower activity later in the quarter reinforce the need for prudent expectations. Average loans grew 10% and deposits increased 8%. We value the breadth of its customer relationships and capital strength, which support reinvestment and allow several businesses to contribute when individual revenue streams soften.
Kinder Morgan KMI | October 21
Adjusted earnings per share increased 21%, and the project backlog reached $14.4 billion. Long-term contracts and demand for gas supporting power generation underpin the holding case. Backlog growth offers future earnings potential, provided construction, financing and project returns remain consistent with management’s targets. More than three-quarters of the backlog supports power generation and local distribution demand. We favor this connection to essential infrastructure, where contracted projects can translate growing energy requirements into additional earnings over time.
Merck MRK | October 29
Sales grew 5%, with WINREVAIR revenue increasing 93% and KEYTRUDA-related sales rising 6%. Management raised the midpoint of its sales outlook. Newer therapies strengthen the ownership case, although replacing future patent-exposed revenue remains essential. Pipeline execution must continue translating into commercially meaningful products. WINREVAIR generated $694 million in quarterly sales, while WELIREG revenue increased 56%. These contributions give us evidence of commercial expansion beyond KEYTRUDA and support continued investment in the company’s broader portfolio of therapies.
Meta Platforms META | October 21
Revenue increased 26%, with advertising impressions up 10% and pricing up 14%. These gains support AI monetization already occurring. Litigation and infrastructure spending pressured results and cash flow. Continued ownership rests on advertising strength and future returns on investment, rather than dismissing spending concerns. We see the advertising results as evidence that better recommendations and monetization can generate revenue before newer AI products mature. That established business provides a substantial operating earnings base from which to fund development.
Netflix NFLX | October 20
Revenue grew 12%, operating margin reached 34.6%, and free cash flow totaled $2.9 billion. Healthy retention and pricing support the holding. Some margin upside reflected expense timing, so the stronger argument is recurring demand and cash generation rather than assuming this quarter’s margin persists. Management reported improving churn and maintained its annual outlook. We value evidence that customers continue to find the service worthwhile after pricing changes, supporting recurring revenue and the potential to fund programming internally.
Omnicom OMC | October 22
Core organic revenue grew 7.2%, and adjusted earnings per share increased 22%. Management remained on track for $900 million in 2026 acquisition-related cost savings. Growth and integration benefits support ownership, while customer retention and successful adaptation to AI determine whether those gains endure. Core adjusted operating profitability improved as organic growth and cost reductions contributed together. We hold for that combination: customer demand can expand revenue, while integration efficiencies can increase the earnings retained from each dollar.
ServiceNow NOW | October 28
Subscription revenue grew 21%, while current contracted revenue reached $13.65 billion. AI net new annual contract value increased 65%. These commitments support enterprise adoption and continued ownership. The key is converting strong demand into lasting per-share cash flow while managing compensation, competition and investment costs. We value contracted customer commitments because they offer evidence of demand beyond promotional claims. Rising adoption of AI capabilities strengthens the case that ServiceNow can expand its role in customers’ everyday business processes.
Visa V | October 27
Net revenue grew 13%, and adjusted earnings per share rose 17%. Payments volume increased 9%, with cross-border activity also expanding. Network scale and transaction growth support the holding, while the dividend increase signals confidence. Regulatory costs and consumer spending remain important variables to monitor. Cross-border volume excluding intra-Europe transactions increased 14%. We continue to value the combination of domestic payment activity and international commerce, which provides multiple growth drivers and supports earnings expansion as electronic transactions increase.
Constellation Brands STZ | October 6
Net sales increased 6%, comparable earnings per share rose 3%, and beer sales grew 5%. Year-to-date free cash flow increased 4%. Brand strength and category share gains support continued ownership, while modest operating-income growth highlights the need to manage costs and sustain demand. The company reaffirmed its annual comparable earnings and cash-flow outlook. We hold for the opportunity to translate category share gains into recurring cash generation, supporting reinvestment and shareholder returns while maintaining financial flexibility.
OGE Energy OGE | October 28
Earnings per share rose to $1.52 from $1.14, and management raised its full-year outlook. Warmer weather drove much of the improvement. Regulated utility operations and grid investment support the long-term holding case, while weather-normalized earnings and timely recovery of investment costs remain essential. We hold OGE for its regulated earnings base and investment in essential electricity infrastructure. Growing regional needs can create opportunities to expand that base, provided approved customer rates compensate shareholders for the capital committed.
These summaries cover October releases rather than all fiscal third-quarter reports. KKR’s next earnings release is scheduled for November 9. BIL and custodial cash are excluded from company earnings coverage.
Our view heading into November
We see enough economic activity and earnings potential to own businesses that can grow. We also see enough pressure from financing costs, competition and household budgets to insist on a reasonable purchase price. This combination explains why software and payments can sit alongside pharmaceuticals, rental properties and Treasury bills in the same value strategy.
We intend to remain invested in businesses with improving economics and credible paths to higher cash flow per share. We will use earnings reports to test that conviction, retain liquidity for attractive opportunities, and avoid treating short-term price weakness as a complete assessment of business value. For positions under pressure, the strongest argument for holding is measurable progress in the business. That is the evidence we will continue to demand.
If you have any questions or would like to discuss the portfolio in more detail, please do not hesitate to contact us directly.
Sincerely,
Donald L. Hagan, CFA®
Regan Teague, CFA®, CFP®
Disclosure: The aforementioned positions may change at any time.
Disclosure: *Note that individuals’ percentage gains relative to those mentioned in this report may differ slightly due to portfolio size and other factors. Returns are based on a representative account. The information contained herein is provided for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. The securities, instruments, or strategies described may not be suitable for all investors, and their value and income may fluctuate. Past performance is not indicative of future results, and there is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. All investments involve risk, including the possible risk of loss.
This material is intended to provide general market commentary and should not be relied upon as individualized investment advice. Investors should consult with their financial professional before making any investment decisions based on this information.
Data and analysis are provided “as is” without warranty of any kind, either express or implied. Day Hagan Asset Management, its affiliates, employees, or third-party data providers shall not be liable for any loss sustained by any person relying on this information. All opinions and views expressed are subject to change without notice and may differ from those of other investment professionals within Day Hagan Asset Management or Ashton Thomas Private Wealth, LLC.
Accounts managed by Day Hagan Asset Management or its affiliates may hold positions in the securities discussed and may trade such securities without notice.
Day Hagan Asset Management is a division of and doing business as (DBA) Ashton Thomas Private Wealth, LLC, an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.
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Day Hagan Asset Management
1000 S. Tamiami Trail
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Toll-Free: (800) 594-7930 | Office Phone: (941) 330-1702
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Definitions:
Adjusted EPS / EPS without NRI: Earnings per share excluding non-recurring items. This metric is often used to evaluate a company’s underlying profitability by removing unusual gains, losses, or one-time expenses.
AI Infrastructure: The technology hardware, software, networking, data-center capacity, cloud resources, and power systems needed to support artificial intelligence workloads.
Balance-Sheet Quality A measure of a company’s financial strength, including cash levels, debt burden, liquidity, and ability to fund operations through different market environments.
Cash Flow Generation: A company’s ability to produce cash from its business operations after funding expenses and investment needs.
Cash / T-Bills: Portfolio holdings in cash or short-term U.S. Treasury bills. These positions typically provide liquidity, lower volatility, and income tied to short-term interest rates.
Cloud Infrastructure: The servers, data centers, networking equipment, and software platforms that allow companies to store, process, and access data and applications remotely.
Commodity Sensitivity: The degree to which a company’s earnings, cash flow, or stock price is affected by changes in commodity prices, such as oil or natural gas.
Defensive Ballast: Portfolio holdings that may help reduce volatility or provide stability during weaker equity markets, often including cash, utilities, consumer staples, health care, or high-quality dividend-paying companies.
Digital Workflow Solutions: Software platforms that automate, organize, and improve business processes across departments such as IT, security, operations, finance, and human resources.
Earnings Surprise: The difference between reported earnings and analysts’ expectations. A positive earnings surprise occurs when reported earnings exceed consensus estimates.
Enterprise IT Modernization: The process by which companies upgrade technology systems, including software, cloud platforms, cybersecurity, networks, data centers, and computing infrastructure.
EVA / Economic Value Added: A measure of whether a company is generating returns above its cost of capital. Positive EVA suggests the company is creating economic value for shareholders.
Factor Sensitivity: A portfolio’s exposure to common investment characteristics, such as growth, value, quality, momentum, size, dividend yield, or interest-rate sensitivity.
Free Cash Flow Per Share: Free cash flow divided by shares outstanding. It shows how much cash a company generates for each share after capital spending.
Growth-Oriented Companies: Companies expected to grow revenue, earnings, or cash flow faster than the broader market. These businesses often trade at higher valuation multiples.
Large-Cap Stability: Exposure to larger, more established companies that may have stronger balance sheets, broader revenue sources, and greater access to capital.
Operating Leverage: The ability of a company to grow earnings faster than revenue as fixed costs are spread across a larger revenue base.
Per-Share Fundamentals: Financial metrics expressed on a per-share basis, such as revenue per share, earnings per share, free cash flow per share, or book value per share. These measures help evaluate whether shareholder economics have improved over time.
Price-to-Cash-Flow: A valuation ratio comparing a company’s stock price to its cash flow per share. Lower ratios may suggest a more attractive valuation, depending on business quality and growth prospects.
Quality / Value Discipline: An investment approach that emphasizes financially sound companies trading at reasonable valuations, with attention to earnings durability, cash flow, balance-sheet strength, and risk.
Rate Sensitivity: The degree to which a stock, sector, or portfolio may be affected by changes in interest rates. REITs, utilities, and dividend-oriented stocks often have meaningful rate sensitivity.
Revenue Per Share: Total company revenue divided by shares outstanding. It helps measure how much revenue is generated for each share owned.
Risk/Reward Profile: The balance between potential return and potential downside risk. A more attractive risk/reward profile suggests that expected upside appears favorable relative to possible losses.
Run-Rate Operational Improvement: Estimated recurring cost savings or efficiency gains expected to continue over time once fully implemented.
Sector Allocation: The percentage of a portfolio invested in each economic sector, such as Information Technology, Financials, Health Care, Energy, Real Estate, or Consumer Staples.
Share Repurchases / Buybacks: When a company buys back its own shares, which can reduce shares outstanding and improve per-share metrics over time.
TTM / Trailing Twelve Months: Financial results from the most recent 12-month period. TTM data is often used to compare current fundamentals with prior fiscal-year results.
Valuation Multiple: A ratio used to compare a company’s market value with financial metrics such as earnings, cash flow, revenue, or EBITDA.
Value-Oriented Managers: Investment managers who focus on companies trading at prices they believe are reasonable or discounted relative to fundamentals such as earnings, cash flow, assets, or long-term value.
Year-over-Year Earnings Growth: The percentage change in earnings compared with the same period one year earlier.