Weekly Investor – October 3, 2016
Energy Sector Outperforms
U.S. equity markets inched slightly higher last week and the S&P 500® Index ended the month of September up 0.02%. After opening lower on Monday, stocks climbed through Wednesday, retreated Thursday and ended up flat for the week on Friday. Deutsche Bank helped boost market sentiment as the bank is reportedly nearing a deal to pay a $5.4 billion settlement to the U.S. Department of Justice which is less than half of the amount originally requested by the DOJ. U.S. economic data was mostly positive and Real GDP growth for second quarter was increased to 1.4%, versus previous estimates of 1.1%. Finally, the energy sector was a top performer as OPEC announced an agreement to limit crude output following a multiple year decrease in oil prices. Looking ahead to this week, investors will await the beginning of earnings season and hope for positive news and direction from Corporate America.
The S&P 500® Index was up 0.2% for the week. The top-performing sectors in the S&P 500® Index included Energy (4.6%) and Industrials (1.0%), while bottom-performing sectors included Health Care (-1.4%) and Utilities (-3.8%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 1.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
E-Trade Financial Corporation (ETFC), a financial services company, provides brokerage and related products and services primarily to individual retail investors.
ETFC has been under the direction of new leadership since the beginning of 2013. Since that time, ETFC has been able to achieve consistent growth of accounts and assets while decreasing the size of its troubled legacy home equity loan portfolio. Over the next few years, we believe a stable economy and improving housing market will accelerate ETFC’s ability to eliminate the remaining portion of its legacy portfolio. This change in operating structure will allow ETFC to focus on its core business, online brokerage, where the company is taking share away from traditional brokers. We believe ETFC has the flexibility to grow profits higher than expected and therefore return capital to shareholders through share buy backs and dividend payments. For these reasons, we have added ETFC to our portfolio as we believe the company represents favorable odds for our portfolio.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.1% |
| Masco Corporation | 4.5% |
| Post Holdings, Inc. | 4.4% |
| Baxter International, Inc. | 4.3% |
| ConAgra Foods, Inc. | 4.2% |
| Red Hat, Inc. | 3.7% |
| ON Semiconductor Corp. | 3.5% |
| CBS Corporation | 3.5% |
| Danaher 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.
