Weekly Investor – January 3, 2017
A New Year
U.S. equity markets ended the last week of the year down although they ended the year in positive territory. As expected, markets were mostly quiet last week and trading was thin. U.S. economic data was mixed. November existing homes sales fell 2.5% versus expectations of 0.5% increase. Additionally, initial jobless claims were in line with expectations and came in at 265,000 for the week. Looking ahead to the new year, equity markets will aim for a ninth consecutive year of positive returns. While equity valuations do not seem overly compelling, investors will look to earnings growth as the main catalyst to drive stock prices higher. It is estimated that the S&P 500 Index will grow earnings by 12% in 2017. Happy New Year and stay tuned….
The S&P 500® Index was down 1.1% for the week. The top-performing sectors in the S&P 500® Index included Utilities (-0.2%) and Telecommunications (-0.5%), while bottom-performing sectors included Financials (-1.4%) and Technology (-1.5%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.5%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Earnings Power
Schlumberger LTD (SLB) is a global oilfield services company that employs more than 105,000 people in more than 80 countries. Operating through four “GeoMarket” regions, the company’s technologies and services help the world’s largest exploration and production (E&P) companies discover and produce the energy required to fuel the global economy. Founded in 1927 and based in Houston, Texas, SLB’s service portfolio includes some of the most sophisticated drilling, testing and production equipment in the industry.
Many E&P companies curtailed spending during the recession, dampening SLB’s earnings outlook. However, several quarters of higher energy prices and the discovery of large oil resources in Brazil created rising capital expenditure budgets as well as higher demand for energy services. In addition, oil and natural gas are becoming more difficult to find, leading to more complex and expensive exploratory programs and therefore an increased demand for SLB’s services. Argent anticipates that energy companies are beginning a multi-year investment cycle that will highlight the value of SLB’s industry leading services and accelerate the company’s earnings power.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 6.8% |
| Post Holdings, Inc. | 4.4% |
| JP Morgan Chase & Co. | 4.1% |
| Masco Corporation | 4.0% |
| CBS Corporation | 3.9% |
| Baxter International Inc. | 3.8% |
| Lincoln National | 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.
