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News & Our Thinking

Weekly Investor

Weekly Investor – April 10, 2017

11 April 2017

 

Geopolitical Concerns Sway Markets

U.S equity market ended last week slightly down and the S&P 500® Index returned -0.2%. News headlines were packed with the U.S. Supreme Court confirmation, Chinese President Xi visiting the U.S. and President Trump’s decision to bomb a Syrian airbase that launched chemical attacks. Equities began to sell off on Thursday afternoon as President Trump hinted that something was to be done about the situation in Syria.  As President Trump had dinner with President Xi, he also ordered the bombing of the Syrian base, raising geopolitical risks for the market.  Trade implications of the meeting between President Xi and President Trump remain an important topic for equity markets as President Trump is hoping to change the trade deficit between the two countries.  Finally, on Friday Supreme Court nominee Neil Gorsuch was confirmed by the Senate.  Broad market expectations are that Justice Gorsuch will be a conservative player, particularly where it comes to business matters.  Despite the geopolitical headlines, U.S. economic reports showed strength and the jobs, wage and durable goods reports were all positive.  Looking ahead to next week, investors will pay close attention to any Russian reaction to the Syrian bombings.  Additionally, earnings season will begin as mega banks such as JP Morgan, Wells Fargo and CitiGroup are all expected to report.

The S&P 500® Index was down 0.3% for the week. The top-performing sectors in the S&P 500® Index included Energy (0.6%) and Basic Materials (0.3%), while bottom-performing sectors included Financials (-1.0%) and Telecommunications (-1.1%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.4%.

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.) 6.6%
Post Holdings, Inc. 4.4%
Baxter International Inc. 4.2%
Skyworks Solutions, Inc. 4.0%
CBS Corporation 3.9%
Masco Corporation 3.9%
ON Semiconductor Corp. 3.9%
JP Morgan Chase & Co. 3.7%
Marvell Technology Group 3.7%
Lincoln National 3.5%

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.