Weekly Investor – May 22, 2017
All Eyes on Washington
U.S equity markets ended last week lower after a turbulent few days. Investors once again weighed another political setback for the Trump administration versus continued strong corporate fundamentals. A sell-off on Wednesday was driven by reports that President Trump had asked then FBI Director James Comey to drop the investigation into former national security advisor Michael Flynn. However, while President Trump’s time in the White House continues to be boisterous, corporate profits are strong and growing by the fastest pace witnessed since the third quarter of 2011. Additionally, the overall unemployment rate in the U.S. remains at a historically low level of 4.4%. Looking ahead, investors will pay close attention to the release of April housing data and the second reading of first quarter GDP. Earnings season is mostly over as 95% of S&P 500 companies have reported and the index grew earnings by 13.9% during the first quarter. Once again, all eyes will be on Washington.
The S&P 500® Index was down 0.4% for the week. The top-performing sectors in the S&P 500® Index included Consumer Staples (0.6%) and Utilities (0.5%), while bottom-performing sectors included Consumer Discretionary (-0.8%) and Financials (-1.0%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.2%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Renewed Focus
Masco Corporation (MAS) manufactures and distributes home improvement and building products. Products include faucets, cabinets, architectural coatings and windows. MAS distributes these products through home improvement retailers and wholesalers as well as directly to homebuilders.
With well-known brands like Behr paints, Delta faucets, and KraftMaid cabinets, we believe that MAS is well positioned to grow profitably, especially in the strong US housing market. In addition, MAS recently has concluded a strategic review of its operations, which resulted in the spin-off of its installation business, cost cutting in the corporate office, restructuring of the cabinets business and a detailed three year segment business plan with clear targets. We believe these actions address problems that have plagued MAS in the past. With its renewed focus on execution and its established position as a supplier to the strong housing industry, we believe MAS represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Alphabet, Inc. (Google, Inc.) | 7.5% |
| Baxter International Inc. | 4.5% |
| Masco Corporation | 4.3% |
| Post Holdings, Inc. | 4.1% |
| Skyworks Solutions, Inc. | 4.0% |
| ON Semiconductor Corp. | 3.9% |
| Marvell Technology Group | 3.9% |
| JP Morgan Chase & Co. | 3.6% |
| Wynn Resorts Ltd. | 3.6% |
| CBS Corporation | 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.
