Weekly Investor – February 8, 2016
Seesaw!
U.S equity markets lost ground last week and the S&P 500® Index returned -3.04%, marking the second worst week of 2016. On a year-to-date basis, the S&P 500 has declined 7.9%. Stocks opened the week lower as concerns surrounding China added downward pressure on markets. On Tuesday, energy stocks led the way further down as oil closed below $30 per barrel. Over the remainder of the week, economic data seesawed and contributed to volatility. The ISM Non-Manufacturing Index declined to 53.5 in January which was below expectations of 55.1 and also below December’s reading of 55.8. The non-manufacturing sector makes up the larger portion of the US economy (vs. manufacturing) and readings above 50 continue to reflect expansion within the sector. Additionally, U.S. initial jobless claims of 285k were higher than consensus estimates of 278k. However, the unemployment rate was lower than expected and came in at 4.9%. Looking forward, investors will pay attention to major economic reports expected this week including, retail sales and consumer sentiment readings.
The S&P 500® was down 3.1% for the week. The top-performing sectors in the S&P 500® Index included Basic Materials (4.8%) and Utilities (2.5%), while bottom-performing sectors included Technology (-5.4%) and Consumer Discretionary (-5.4%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 1.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Best-In-Breed
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 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 entire previous board of directors and the resignation of the DRI’s CEO. 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
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.3% |
| Post Holdings, Inc. | 5.9% |
| Danaher Corp. | 4.3% |
| ConAgra Foods, Inc. | 4.1% |
| Baxter International Inc. | 3.9% |
| C.H. Robinson Worldwide | 3.5% |
| CBS Corporation | 3.5% |
| Teva Pharmaceutical | 3.4% |
| The Dow Chemical Co. | 3.4% |
| Red Hat, 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.
