Weekly Investor – December 14, 2015
Oil Prices Drop
U.S equity markets fell sharply last week. The S&P 500® Index returned -3.74%, marking the second worst week of 2015 for the index. The downfall began Monday as sinking crude oil prices drove energy and material stocks down. The decline of European equity markets drove U.S. markets down further on Tuesday and negative wholesale inventory data perpetuated the decline on Wednesday. Thursday brought a sigh of relief but it was short lived. U.S. initial jobless claims were disappointing, coming in at 282K which was higher than consensus estimates of 270K. However, despite the increase, the four-week moving average is at a level which has been historically consistent with job creation. In stock news, Dow Chemical (DOW) and DuPont (DD) announced an agreement to combine but the news was not enough to uphold equity markets. Looking ahead to this week, investors wait on the Federal Reserve’s announcement on Wednesday regarding interest rates.
The S&P 500® was down 3.8% for the week. The top-performing sectors in the S&P 500® Index included Utilities (-1.8%) and Consumer Staples (-2.0%), while bottom-performing sectors included Financials (-5.4%) and Energy (-6.5%). 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.
Upside Potential
SunTrust Banks, Inc. (STI) was founded in 1891 and is headquartered in Atlanta, Georgia. STI provides various financial services within the United States. Historically, STI has been a solid, southeast regional bank. However, since 2008 the severe housing bubble in Florida combined with the global financial crisis has put significant earnings and capital pressure on STI.
STI’s CEO, Bill Rogers, is committed to lowering cost and rebuilding STI’s business. In Argent’s view, the current depressed valuation of STI is due to the expectation of a relatively slow recovery and worries over the company’s exposure to older and troubled mortgages. Therefore, we believe STI’s upside represents favorable odds for our clients as the company works to return to a solid, healthy regional bank over the next few years.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.0% |
| Post Holdings, Inc. | 5.2% |
| Danaher Corp. | 4.2% |
| Electronic Arts, Inc. | 4.0% |
| Skyworks Solutions, Inc. | 3.7% |
| Expedia, Inc. | 3.6% |
| ConAgra Foods, Inc. | 3.6% |
| LinkedIn Corporation | 3.4% |
| The Dow Chemical Co. | 3.4% |
| Teva Pharmaceutical | 3.4% |
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.
