Weekly Investor – December 27, 2016
Quiet as a Mouse
U.S. equity markets were positive last week and the S&P 500 Index advanced 0.3%. Given the holiday, trading was thin last week and markets were mostly quiet. The S&P 500 is now up 3.1% in December, up 4.9% for 4Q16 and up 13.2% on a year-to-date basis. Assuming that the index remains positive through this week, 2016 will mark the 8th consecutive calendar year of gains. Economic data was also mostly positive. Following the latest Federal Reserve benchmark lending rate increase, U.S. mortgage rates have risen to over 4% on 30-year loans marking the highest reading since April of 2014. Additionally, existing home sales increased 07% in November and are up 15.4% compared to one year ago. Looking forward, investors expect another quiet week and look to close out 2016 in positive territory.
The S&P 500® Index was up 0.3% for the week. The top-performing sectors in the S&P 500® Index included Telecommunications (2.4%) and Financials (0.9%), while bottom-performing sectors included Basic Materials (-0.3%) and Consumer Discretionary (-0.3%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Unique Position
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.) | 6.8% |
| Post Holdings, Inc. | 4.3% |
| JP Morgan Chase & Co. | 4.0% |
| Masco Corporation | 4.0% |
| CBS Corporation | 3.9% |
| Lincoln National | 3.8% |
| Baxter International Inc. | 3.8% |
| Marvell Technology Group | 3.7% |
| ON Semiconductor Corp. | 3.5% |
| The Dow Chemical | 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.
