Weekly Investor – January 18, 2016
Focus on the Long Term
U.S equity markets ended the week down. The S&P 500® Index returned -2.2% last week and has returned -7.9% over the last two weeks. This marks the worst two week return since November of 2011 when the index returned -8.2%. Oil futures closed Friday at $29.42. This is the first time since 2003 oil futures closed under $30. Additionally, earnings season began with mixed results. Alcoa, Inc. kicked off the season with an announcement that sales had fallen 18% last quarter and shares of the company fell 9% on the following trading day. However, JP Morgan Chase (JPM) announced earnings and revenue above analyst expectations, citing lower litigation costs along with strong operating results. Shares of JPM were rewarded and rose 1.5% the next day. Much of the recent volatility stems from the slowing Chinese economy. As the second largest economy in the world, many investors worry about the impacts of the current uncertainty. However, at Argent, we are long-term investors and we are valuation focused. Our disciplined process allows us to identify companies with catalysts for change which will propel results beyond what is expected in any market environment. Looking ahead, investors hope for continued good news from Corporate America as they digest more earnings reports.
The S&P 500® was down 2.2% for the week. The top-performing sectors in the S&P 500® Index included Utilities (0.7%) and Telecommunications (-0.2%), while bottom-performing sectors included Financials (-3.0%) and Basic Materials (-4.4%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.0%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Beneficiary of Changing Industry
Ciena Corporation (CIEN) provides equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks worldwide. CIEN was founded in 1992 and is headquartered in Hanover, Maryland.
We have added CIEN to our portfolio as digital traffic is expected to grow exponentially in the coming years. Going forward, we believe telephone companies, cable operators and businesses will need to sustain a level of communication infrastructure much different than was needed previously. Changes in communication for these industries translate to higher spending in order to upgrade existing networks. Within communication infrastructure, CIEN is offering a platform of products and software which allow for higher network efficiency. Thus, we believe CIEN stands to benefit from industry changes and has the potential to gain market share and sustain growth above peer levels.
Top 10 Equity Holdings
|Alphabet, Inc. (Google, Inc.)||7.2%|
|Post Holdings, Inc.||5.1%|
|Electronic Arts, Inc.||4.3%|
|ConAgra Foods, Inc.||4.0%|
|Red Hat, Inc.||3.8%|
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.