Weekly Investor – April 25, 2016
Energy Up!
U.S. equity markets ended the week in positive territory as earnings reports once again boosted equity markets. With 130 of S&P 500® Index members reporting results to date, 76% have exceeded expectations on the bottom-line, above the 5 year average of 67%. However, earnings results have been mixed. Energy shares were the top performers last week as oil jumped after Iraq’s oil minister said OPEC and other petroleum producers could meet next month to freeze supply. In economic news, U.S. initial jobless claims unexpectedly fell to the lowest level since 1973, a positive sign for the economy. Looking ahead, investors will pay close attention to earnings from bellwethers including Lockheed Martin, Ford Motor and Apple, Inc.
The S&P 500® Index was up 0.5% for the week. The top-performing sectors in the S&P 500® Index included Energy (5.2%) and Financials (2.8%), while bottom-performing sectors included Consumer Staples (-2.1%) and Utilities (-3.2%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 1.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
ON Semiconductor Corp. (ON) designs, manufactures and markets semiconductor components for electronic systems and products worldwide. ONNN was founded in 1999 and is headquartered in Phoenix, AZ.
ON is well positioned to benefit from increasing electronic components needed to power safer, smarter connected cars over the next few years. ON is also making acquisitions. ON recently acquired Aptina, a smaller peer and recently announced plans to purchase Fairchild Semiconductor. These acquisitions allow ON to generate much of its revenue from the auto industry. We believe this market will only grow for ON as the number of sensors and cameras on cars increase. Additionally, industrials are another area of potentially explosive growth for the company. We believe the growth of connected devices, stemming from the “internet of things” can lead to robust sales and profit growth for ON. Finally, shares of ON are currently trading at a discount to peers. For these reasons, we have added ON to our portfolio as we believe ON possesses favorable odds.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 6.9% |
| Post Holdings, Inc. | 5.9% |
| Masco Corporation | 4.4% |
| Danaher Corp. | 4.4% |
| ConAgra Foods, Inc. | 4.2% |
| Baxter International Inc. | 4.1% |
| CBS Corporation | 3.8% |
| Red Hat, Inc. | 3.5% |
| C.H. Robinson Worldwide | 3.4% |
| The Dow Chemical | 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.
