Weekly Investor – October 10, 2016
Manufacturing Data Provides Bright Spot
U.S. equity markets turned in negative performance last week and the S&P 500® Index declined 60 basis points following three weeks of positive gains. Weak economic data sent markets down. August construction spending fell and the U.S. Manufacturing PMI number came in at its lowest level since June 2016. Increased expectations of an interest rate hike by December worried investors after regional Presidents suggested a move was coming. Good news came from the September ISM report which showed that manufacturing beat expectations and showed a return to growth. The two most forward looking measures, new orders and production, both jumped in September, indicating growth in the months ahead. Looking forward, investors will begin digesting earnings reports from Corporate America and hope for good news.
The S&P 500® Index was down 0.7% for the week. The top-performing sectors in the S&P 500® Index included Financials (1.5%) and Energy (0.0%), while bottom-performing sectors included Utilities (-3.8%) and Telecommunications (-3.8%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 1.7%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Fastenal (FAST) is an industrial distribution company that was founded in 1967 and is headquartered in Winona, Minnesota. FAST distributes parts and supplies for industrial and construction end markets, selling through both retail and wholesale channels.
Originally a metal fasteners manufacturer and supplier, the company has since diversified into supplying a variety of products including fasteners, screws, nuts and bolts as well as maintenance and repair products.
FAST enters 2016 with a new CEO, the company’s former CFO, Dan Florness. Florness and his management team intend to focus on several new growth initiatives to increase sales growth. FAST has planned new store openings to add to their retail base and have several wholesale initiatives surrounding their vending and onsite product divisions. With a new management team looking to maintain sales momentum and restore the company’s historical premium to the market valuation, we believe FAST offers favorable odds for our portfolio
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.1% |
| Post Holdings, Inc. | 4.6% |
| Masco Corporation | 4.4% |
| Baxter International, Inc. | 4.4% |
| ConAgra Foods, Inc. | 4.2% |
| CBS Corporation | 3.5% |
| ON Semiconductor Corp. | 3.5% |
| Red Hat, Inc. | 3.5% |
| Skyworks Solutions, Inc. | 3.5% |
| Danaher Corp. | 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.
