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Weekly Investor – June 12, 2017


 

A Rocky Road

U.S equity markets experienced ups and downs last week to close lower. Political news continues to drive equity markets.  Former FBI Director James Comey testified in front of the Senate on Thursday and raised questions about President Trump’s conduct. Comey did not implicate that President Trump had any direct connections to Russia or that the President tried to impede the investigation.  On the other side of the Capital, the House voted to overhaul major sections of the Dodd-Frank law.  The new measure would exempt banks from stricter oversight by regulators and give Congress more power over the bank regulatory system.  Overseas, the U.K. voted in a snap election fronted by Prime Minister Theresa May.  The vote was May’s attempt to increase her parliamentary majority.  However, the plan failed as the Labour Party increased its number of seats.  Looking ahead to this week, The Federal Reserve is expected to decide on interest rates and the implied probability of a rate hike currently stands at 95.7%.  All eyes and ears will be interested in the decision…

The S&P 500® Index was down -0.3% for the week. The top-performing sectors in the S&P 500® Index included Financials (3.6%) and Energy (2.1%), while bottom-performing sectors included Consumer Discretionary (-2.0%) and Technology (-2.2%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.6%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

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Growth of Connected Devices

ON Semiconductor Corp. (ON) designs, manufactures and markets semiconductor components for electronic systems and products worldwide. ON was founded in 1999 and is headquartered in Phoenix, AZ.

ON is well positioned to benefit from increasing electronic components needed to power safer, smarter connected cars over the next few years. ON is also making acquisitions.  ON recently acquired Aptina, a smaller competitor as was Fairchild Semiconductor.  These acquisitions allow ON to generate much of its revenue from the auto industry.  We believe this market will only grow for ON as the number of sensors and cameras on cars increase.  Additionally, industrials are another area of potentially explosive growth for the company.  We believe the growth of connected devices, stemming from the “internet of things” can lead to robust sales and profit growth for ON. Finally, shares of ON are currently trading at a discount to peers.  For these reasons, we have added ON to our portfolio as we believe ON possesses favorable odds.

 

Top 10 Equity Holdings


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Alphabet, Inc. (Google, Inc.) 7.4%
Baxter International Inc. 4.6%
Masco Corporation 4.2%
Post Holdings, Inc. 4.1%
Marvell Technology Group 4.1%
Skyworks Solutions, Inc. 4.0%
ON Semiconductor Corp. 4.0%
Wynn Resorts Ltd. 3.7%
Fortive Corporation 3.7%
JP Morgan Chase & Co. 3.7%

This newsletter presents selected recommendations from portfolio managers of Argent Capital Management LLC, a registered investment advisor. Opinions reflect the portfolio manager’s judgment on the date above and are subject to change. A list of stocks recommended by Argent is available upon request. You should not assume that these recommendations are or will be profitable. In the course of it’s business, Argent’s client accounts may be buying and selling these stocks.


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