Weekly Investor – September 26, 2016
No Interest Rate Hike
U.S. equity markets finished in positive territory last week on the heels another delayed interest rate increase. On Wednesday, the Federal Reserve announced that it would keep interest rates at 0.25 for the time being. The Fed’s dot plot now implies one increase in 2016 and two in 2017. Overseas, the Bank of Japan followed suit and announced a 10-year interest rate target to fight deflation. Economic news was not as encouraging to investors. Poor existing home sales and slower factory activity were reported. Additionally, crude oil had a volatile week and closed at $44.48 per barrel on Friday. Throughout the week, OPEC appeared to have a deal where the Saudis offered to cut oil production as long as Iran froze its production growth. In the end, OPEC announced that no deal was imminent. Looking forward, investors will close out the third quarter of 2016 and hope for positive news from Corporate America.
The S&P 500® Index was up 1.2% for the week. The top-performing sectors in the S&P 500® Index included Utilities (3.4%) and Telecommunications (1.9%), while bottom-performing sectors included Technology (0.4%) and Energy (0.1%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 1.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Tempur Sealy International Inc. (TPX) develops, manufactures and markets mattresses, foundations, pillows and other products. TPX’s brands include Tempur, Tempur-Pedic, Sealy and Sealy Posturepedic.
After three tumultuous years of execution missteps by its management, TPX found itself in a board room battle with a leading shareholder, H Partners. H Partners successfully waged a proxy battle to oust several board members as well as TPX’s CEO. With H partners leading the search, TPX recently announced the appointment of Scott Thompson to head the company. Mr. Thompson arrives at TPX after having led Dollar Thrifty through a multi-year turn-around that drove significant shareholder value creation. We are optimistic that Mr. Thompson’s playbook can lead to similar success at Tempur Sealy.
Top 10 Equity Holdings
|Alphabet, Inc. (Google, Inc.)||7.2%|
|Post Holdings, Inc.||6.3%|
|Baxter International, Inc.||4.3%|
|ConAgra Foods, Inc.||3.9%|
|Red Hat, Inc.||3.6%|
|Wynn Resorts Ltd.||3.4%|
|ON Semiconductor Corp.||3.4%|
|Skyworks Solutions, 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.