Weekly Investor – May 16, 2016
A Seesaw Week
U.S. equity markets ended the week down and the S&P 500® Index posted a negative 0.5% return for the week. However, the index has gained close to 1% on a year-to-date basis. The week began on positive footing Monday as health care stocks led the way up. Tuesday markets opened higher as strong news out of Asia pushed up European markets. Declines began Wednesday after disappointing earnings releases from retail and media companies and continued Thursday and Friday. In U.S. economic news, jobless claims unexpectedly rose last week to the highest level since 2015, following a deceleration in hiring in April. Consumer confidence provided a bright spot and beat expectations, rising to a nearly one-year high. This rise was attributed to upbeat investor moods surrounding income and inflation. Finally, energy and oil had a seesaw week but crude oil closed the week at $46.21 a barrel, increasing 3.47% from the previous week’s close. Looking ahead to this week, investors will pay close attention to major economic reports including housing and industrial production readings.
The S&P 500® Index was down 0.5% for the week. The top-performing sectors in the S&P 500® Index included Utilities (0.9%) and Consumer Staples (0.0%), while bottom-performing sectors included Financials (-1.1%) and Consumer Discretionary (-1.4%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 1.7%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Upside Potential
Red Hat, Inc. (RHT) provides open-source software products and services to large businesses and enterprises. Open-source is a Linux based software platform that competes against Microsoft and is the leading code provider for Cloud Computing. RHT makes money on support, training and integration of its software. RHT also provides quality assurance for its open-source enterprise software.
With the accelerating adoption of Cloud Computing, we believe RHT can see its end markets grow faster than currently anticipated. RHT has a long history as the gold standard for open-source software. We believe the current valuation does not fully reflect the upside potential of RHT’s unique position in the growth of Cloud Computing.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 6.9% |
| Post Holdings, Inc. | 6.4% |
| Danaher Corp. | 4.5% |
| Baxter International Inc. | 4.4% |
| ConAgra Foods, Inc. | 4.4% |
| Masco Corporation | 4.3% |
| CBS Corporation | 3.7% |
| Red Hat, Inc. | 3.5% |
| C.H. Robinson Worldwide | 3.4% |
| Lowe’s Companies, 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.
