Weekly Investor – February 20, 2018
Return to Positive Territory
The S&P 500 returned 4.3% last week to put the index back in positive territory for the year. U.S. stocks had their best week in five years. Volatility is a key concern for investors, as the steady upward climb of 2017 has not carried over into 2018. That is in contrast to corporate fundamentals. Of the 77% of S&P 500 companies that have reported earnings this year, 76% have beat earnings expectations.
Short-term Treasury yields rose sharply last week as investors reacted to stronger than expected inflation data. January’s reading for the Core Consumer Price Index (CPI), which excludes volatile food and energy prices, came out at 0.3%, higher than consensus. This was the largest monthly increase in over a year. The Producer Price Index (PPI) report also showed prices climbing higher than expectations. Bond yields rose, with the benchmark 10-year Treasury note touching a multi-year high of 2.94%.
Looking ahead to this week, investors will focus on inflation as the Federal Reserve releases the minutes of its January meeting.
The S&P 500® Index was up 4.3% for the week. The top-performing sectors in the S&P 500 Index included Technology (5.8%) and Financials (4.7%), while bottom-performing sectors included Telecommunications (2.4%) and Energy (1.9%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.9%.
We continue to seek those companies that reflect our Change-Based InvestingSM approach.
Room for Growth
VMware Inc. is an enterprise software company that provides server and cloud infrastructure solutions in the United States and internationally. The company was incorporated in 1998 and is headquartered in Palo Alto, Calif.
In the past two years, VMW has made steady progress transitioning its product portfolio to benefit from the new hybrid computing IT infrastructure, where businesses retain computing power in-house while moving part of their data to the cloud. Our Main Street contacts and the recent positive company results support Argent’s thesis that VMW’s new products can drive higher-than-expected revenue growth going forward. Further, VMW’s partnership with Amazon Web Services has the potential to increase the company’s stature in cloud computing. For these reasons, we have added VMW to our portfolio as we believe the company has a long runway of future growth.
Top 10 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google Inc.) | 7.5 |
| Red Hat Inc. | 4.9% |
| Marvell Technology Group | 4.7% |
| Baxter International Inc. | 4.5% |
| Masco Corporation | 4.3% |
| JP Morgan Chase & Co. | 4.2% |
| Fortive Corporation | 3.9% |
| Mastercard Inc. | 3.8% |
| Cognizant Technology | 3.6% |
| Lincoln National | 3.5% |
Small Cap Core
| Wintrust Financial | 3.0% |
| Fortinet Inc. | 2.5% |
| Mastec Inc. | 2.5% |
| Pacific Premier Bancorp | 2.4% |
| First Internet Bancorp | 2.3% |
Dividend Select
| JP Morgan Chase & Co. | 5.8% |
| Marvell Technology | 4.0% |
| Principal Financial | 3.9% |
| Las Vegas Sands Corp. | 3.8% |
| Occidental Petroleum | 3.7% |
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.
