News & Our Thinking

Weekly Investor

Weekly Investor – October 12, 2015

13 October 2015


Earning Season Underway

Last week equity markets posted their best weekly gain of the year as the Federal Reserve minutes showed caution over increasing interest rates even with an improving economy. The Fed’s minutes led to a relief rally in energy, emerging market stocks and commodities, while the dollar weakened. The health care sector underperformed the broader market for the week as drug pricing practices continued to be scrutinized and biotechnology stocks sold-off.

The unofficial beginning of earnings season kicked off last Thursday with Alcoa Inc. posting a decline in profits due to weakness in aluminum prices as demand from China waned. Looking ahead to this week numerous bellwether companies are set to announce their earnings. Estimates for the 3rd quarter have been cut, leaving a low-bar for investors. However, the recent cuts in estimates are likely justified as slowing global Purchasing Managers Index trends (PMIs), a strong dollar and sluggish emerging market economies are headwinds entering into earnings season.

The S&P 500® was up 3.3% for the week. The top-performing sectors in the S&P 500® Index included Energy (7.8%) and Basic Materials (6.8%), while bottom-performing sectors included Utilities (1.1%) and Health Care (0.3%). 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.

Higher Demand

Lincoln National Corporation (LNC) engages in multiple life insurance and retirement businesses within the United States and sells a range of wealth protection, accumulation and retirement income products and solutions. LNC was founded in 1904 and is headquartered in Radnor, Pennsylvania.

Similar to its industry peers, LNC’s profit has been significantly impacted by the low interest rate environment. However, improving economic signals are currently leading the Federal Reserve to slowly reverse its monetary policy. This change should lead to a gradual climb in interest rates and thus a much improved operating environment for LNC. Additionally, the improving U.S. economy indicates higher potential demand for LNC’s products. We believe LNC is well positioned to benefit from steady U.S. economic improvement and offers favorable odds to our clients.

Top 10 Equity Holdings

Alphabet, Inc. (Google, Inc.) 6.2%
Post Holdings, Inc. 5.0%
Teva Pharmaceutical 4.3%
Danaher Corp. 4.0%
Electronic Arts, Inc. 3.9%
ConAgra Foods, Inc. 3.9%
Expedia, Inc. 3.7%
Skyworks Solutions 3.7%
F5 Networks, Inc. 3.3%
C.H. Robinson 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.