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News & Our Thinking

Weekly Investor

Weekly Investor – August 24, 2015

28 August 2015

 

Global Concern

U.S. equity markets fell last week and the S&P 500® Index declined -5.71%. This was the worst performance of 2015 and pushed the index into negative territory for the year. Throughout the week, investor concern over global growth overshadowed any positive U.S. economic news. A report showed that China’s manufacturing sector dropped to its lowest level in over six years and global markets responded with worry. At home, existing home sales of 5.59 million were higher than expected and is the highest level reached in eight years. However, US initial jobless claims of 277k brought negative news and perpetuated concern of possible deceleration of global growth. Jobless claims were higher than the previous week’s 274k and consensus estimates of 271k. Finally, crude oil closed the week at $40.45 a barrel, a closing low for 2015 and a 34.15% decrease from the 2015 closing high price of $61.43 a barrel set on June 10, 2015. Looking forward, investors will pay close attention to any news overseas and hope recent events are just a reaction to short-term volatility.

The S&P 500® was down 5.8% for the week. The top-performing sectors in the S&P 500® Index included Utilities (-1.2%) and Telecommunications (-2.6%), while bottom-performing sectors included Technology (-7.4%) and Energy (-8.6%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.1%.

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


Substantial Shareholder Value

The Dow Chemical Company (DOW) manufactures and supplies chemical products for use as raw materials in the manufacture of customer products and services worldwide.  DOW was founded in 1897 and is headquartered in Midland, Michigan.

We have added DOW to our portfolio as the company currently maintains the lowest margins among its peers with plans to increase the margins toward peer levels. Additionally, an activist investor has recently become involved in the company and is championing great change which we believe has the potential to unlock substantial shareholder value. Finally, the revolution in shale gas production provides North American-based chemical producers with a tremendous raw materials cost advantage over global competitors, giving DOW a conducive environment to enact positive changes. For these reasons, we have added DOW to our portfolio as we believe the company offers favorable odds.

Top 10 Equity Holdings


.
Google, Inc. 5.9%
Post Holdings, Inc. 5.3%
Teva Pharmaceutical 4.9%
ConAgra Foods, Inc. 4.0%
Electronic Arts, Inc. 4.0%
Danaher Corp. 4.0%
Skyworks Solutions 3.7%
F5 Networks, Inc. 3.5%
Expedia, Inc. 3.4%
JP Morgan Chase & Co. 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.