Weekly Investor – May 31, 2016
Strong Housing Data
U.S. equity markets posted strong gains last week as positive housing data increased investor confidence on the ability of the economy to weather a rate hike this summer. Federal Reserve Chairwoman Janet Yellen said in a speech on Friday that a rate increase in the coming months could be appropriate if the labor market and economy continue to improve. In economic news, new home sales jumped to their highest level in eight years and pending home resales increased by 5.1%, both beating consensus estimates. Given the increased expectation of higher interest rates, bank stocks outperformed the broader market for the second successive week. Investors also paid close attention to Monsanto’s rejection of Bayer AG’s initial $62 billion initial bid for the agricultural company. Looking ahead, investors will pay close attention to data on personal spending, non-farm payrolls for May and the ISM manufacturing report. All have potential to be market moving events.
The S&P 500® Index was up 2.3% for the week. The top-performing sectors in the S&P 500® Index included Technology (3.6%) and Financials (2.6%), while bottom-performing sectors included Energy (1.4%) and Utilities (1.1%). 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.
Favorable Odds
Teva Pharmaceutical Industries Ltd. (TEVA) develops, manufactures, sells and distributes pharmaceutical products worldwide. Founded in 1901, TEVA offers generic pharmaceutical products as well as specialized product families and is headquartered in Petach Tikva, Israel. TEVA produces well known pharmaceuticals such as Copaxone for the treatment of multiple sclerosis, Azilect for the treatment of Parkinson’s and Treanda for the treatment of leukemia and non-Hodgkins lymphoma.
Over the past few years, shares of TEVA have been depressed due to several execution issues within the company. However, TEVA is now in the midst of a turnaround effort led by a new CEO who is focused on improving operations and rebuilding the company’s pipeline through a series of acquisitions and internal development. For these reasons, we have added TEVA to our portfolio as we believe it offers favorable odds.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 6.9% |
| Post Holdings, Inc. | 6.3% |
| Danaher Corp. | 4.4% |
| Masco Corporation | 4.4% |
| ConAgra Foods, Inc. | 4.1% |
| Baxter International, Inc. | 4.0% |
| CBS Corporation | 3.6% |
| Red Hat, Inc. | 3.6% |
| Lowe’s Companies, Inc. | 3.5% |
| C.H. Robinson Worldwide | 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.
