Average Annualized Return Per Closed Trade: 17.9%
Average Return Per Closed Trade: 15.5%
Average Holding Period: 320 days

It has been a while since potential Washington drama has negatively impacted markets and optimism has run high since the November election. However, this week’s health-care bill gridlock served as an injection of reality: even with a Republican majority in both houses of the legislative branch, pushing the Trump agenda through Congress will not necessarily be a cakewalk for the new president.

After an expected vote yesterday on the American Health Care Act (AHCA) was delayed to allow Republican leaders more time to win over holdouts from their own party, President Trump has reportedly behind closed doors issued an ultimatum for the House to vote on the bill today or be stuck with Obamacare for good.

Late this afternoon, House Speaker Paul Ryan had to cancel the vote as it became clear that the bill would not pass. The number of Republican dissenters actually increased, indicating that Republicans will have to head back to the drawing board, assuming they wish to continue to prioritize health care reform.

From an investment perspective it concerns us that President Trump and the Republicans are using up political capital on a complex issue with no easy answers. Although repealing Obamacare has been a popular Republican rallying cry for years, current support for the new health care bill is mixed among Americans and even within the Republican Party itself. More moderate Republicans think the AHCA cuts too much coverage while more hard-line conservatives think it doesn’t gut Obamacare enough.

We would much rather see President Trump and the Republicans focus their attention first on initiatives with clearer and simpler economic benefits rather than rush to tackle health care. Should the Republicans fail to pass the AHCA, it could significantly hinder the president’s other legislative efforts such as infrastructure spending and tax cuts. Indeed, some Republican leaders have already issued that very warning.  

Beyond the current health care row, Congress will soon have to address some budget issues.

Congress will have to avoid a government shutdown when funding expires on April 28 and it will have to tackle the debt limit again some time this year because the debt ceiling suspension expired last week. Congress must vote to either increase or re-suspend the debt ceiling before the Treasury Department’s cash runs out. Republicans would need 60 votes of support in the Senate for both measures.

Stock Update: Our newest portfolio member AAR Corp. (AIR) reported earnings this week for its fiscal year 2017 third quarter, ended February 28. The company had quarterly revenues of $446.7 million and adjusted earnings per share of 38 cents, beating expectations—respectively, $418.5 million and 37 cents.

The company reported strong aviation services demand from its commercial customers—commercial sales up 9.6 percent year-over-year—and it captured several key new contracts during the quarter that will continue to drive future growth. These include multi-year agreements with Allegiant Air (North America), SkyWest (North America), and IndiGo (India). The expeditionary services segment (about 15 percent of overall company revenues) remained a bit soft due to the lower U.S. government military activity in the Middle East compared to that of years past; AAR management noted during the conference call, however, that they see more inquiries in this segment, although it’s too early to count on a rebound and estimate how much benefit it could see from a higher defense budget (assuming President Trump gets the spending boost he seeks). Most important, the other 85 percent of the company is performing quite well.

We continue to rate the stock a “buy” up to $37.

We post a snapshot of our Brain Trust Profits Portfolio and the record of our closed trades below. For a more detailed table of current recommendations as well as information on closed trades, log into our website and click on the ‘Portfolio’ link.
 

Closed Trades: