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News & Our Thinking

Weekly Investor

Weekly Investor – February 23, 2015

24 February 2015

 

Good News for Greece!

U.S. equity markets closed at all-time highs again last week.  Good news in Greece boosted equity market performance as the country was able to reach an agreement with creditors on a four month bailout extension.  Oil futures traded down for the week causing energy stocks to lag the broader market.  At home, U.S. economic reports were mixed.  January housing starts were below expectations and poor weather across the majority of the country most likely impacted the January report.  However, the mid-February Initial Jobless Claims report showed a decline in the number of applications for unemployment.  In stock news, Wal-Mart announced its decision to raise the wages of store employees to $9 per hour, higher than the current federal wage of $7.25.  Upon the news, shares of Wal-Mart fell 1.76%.  Looking ahead, investors prepare to digest another busy week of earnings and hope for positive news from Corporate America.

The S&P 500® was up 0.6% for the week.  The top-performing sectors in the S&P 500® Index included Health Care (1.9%) and Industrials (1.6%), while bottom-performing sectors included Telecommunications (-1.4%) and Energy (-2.4%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.1%.

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


Turn-Around Effect

Founded in 1968 and headquartered in Orlando, Florida, Darden Restaurants, Inc. (DRI) operates full service restaurants in the United States and Canada. It operates restaurants under the Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52 brand names.

DRI is a best-in-breed casual dining company which experienced years of questionable moves by its management team resulting in significant underperformance for shareholders.  Recently, DRI became involved in a proxy fight with activist hedge fund Starboard Value LP.  This proxy contest resulted in the ousting of the previous board of directors.  Since taking over, Starboard has outlined a plan to increase shareholder value and we believe the changes will provide the catalyst which had been missing over the past few years.  We have added DRI to our portfolio as we believe in the turn-around effort and see potential for significant share appreciation.

Top 10 Equity Holdings


.
Electronic Arts, Inc. 5.3%
Google, Inc. 5.0%
Skyworks Solutions 4.7%
Teva Pharmaceutical 4.1%
Post Holdings, Inc. 4.1%
CBS Corporation 3.9%
Danaher Corp. 3.9%
Broadcom Corporation 3.7%
Lincoln National 3.6%
F5 Networks, Inc. 3.3%

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.