Weekly Investor – March 14, 2016
Luck of the Irish?
U.S. equity markets ended another week up and the S&P 500® Index posted a gain for the fourth straight week, returning 1.1%. Global equity markets, a recent source of volatility, provided a bright spot. The European Central Bank decided to take extra steps designed to boost economic growth in the region. Additionally, commodity prices continue to rebound. Oil closed Friday at $38.50, the highest close for 2016, and gold is up nearly 18% for the year. Meanwhile, according to Bloomberg, the odds of a Federal Reserve interest rate hike in June 2016 rose to 50.8%. This is a big change because as of February 11, 2016, odds of a June rate hike were only 1.9%. Looking ahead to this week, investors will pay close attention to presidential primary results as well as economic news such as retail sales and housing starts. Investors hope the luck of the Irish serves the market well.
The S&P 500® Index was up 1.1% for the week. The top-performing sectors in the S&P 500® Index included Basic Materials (2.1%) and Utilities (2.1%), while bottom-performing sectors included Consumer Discretionary (0.6%) and Industrials (0.5%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.0%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Upside Surprise
JP Morgan Chase & Co. (JPM) is a financial holding company that provides various financial services worldwide. Founded in 1823 and headquartered in New York, New York, JPM operates it business in several segments including investment banking, commercial banking, asset management services, retail finance services, as well as credit card and auto services.
JPM emerged from the financial crisis as one of the few financial institutions with a solid balance sheet. JPM demonstrated its superior financial position by passing the Federal Reserve stress tests and also obtaining approval to buyback shares and increase its dividend. Despite the headwinds of a low interest rate environment and a more onerous regulatory landscape, JPM is poised to gain market share as its weaker peers consolidate their businesses to improve their balance sheets. We believe JPM has the potential to significantly surprise on the upside as economic conditions continue to improve for the banking industry. For these reasons we hold JPM in our portfolio and believe it represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.1% |
| Post Holdings, Inc. | 6.0% |
| Danaher Corp. | 4.2% |
| ConAgra Foods, Inc. | 4.2% |
| Masco Corporation | 4.1% |
| Baxter International Inc. | 3.9% |
| CBS Corporation | 3.7% |
| Red Hat, Inc. | 3.5% |
| C.H. Robinson Worldwide | 3.4% |
| Skyworks Solutions, Inc. | 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.
