News & Our Thinking

Weekly Investor

Weekly Investor – February 26, 2018

26 February 2018

Another Strong Earnings Season

After selling off to begin the holiday-shortened week, stocks rose to finish the week higher, as concerns over future interest rate increases subsided. Investors continue to weigh the accelerating pace of economic growth and another strong earnings season against the prospects of higher inflation and interest rates. With nearly 90% of companies having reported earnings for the fourth quarter of 2017, 74% of names have topped estimates, higher than the 70% average over the past four years.

In economic news, new-home construction for January reached the highest level since October 2016, buoyed by a strong labor market and consumer confidence. Looking ahead to this week, Federal Reserve Chairman Jerome Powell will testify before congress. Investors will be focused on any clues about the pace of interest rate hikes. Last Wednesday, the Federal Reserve released the minutes from its January meeting. Comments by the central bank were read to be more “hawkish” by investors. The Fed suggested that the outlook for future growth raises the risk for inflation, meaning that additional rate hikes during the year may be needed. Currently, consensus expectations are for three rate hikes in 2018, but investors are speculating that there could be a fourth. 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 0.6% for the week. The top-performing sectors in the S&P 500 Index included Technology (1.9%) and Basic Materials (1.2%), while bottom-performing sectors included Consumer Staples (-2.2%) and Telecommunications (-2.4%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.9%.

.We continue to seek those companies that reflect our Change-Based InvestingSM approach.

Long-Term Growth

Alphabet Inc. (GOOGL/GOOG) has achieved worldwide name recognition with its famed Google search engine. Beyond this well-known service, the technology company also provides targeted advertising solutions (Google AdSense), collaboration tools for organizations (Google Apps), and a host of additional online utilities such as Google Maps, YouTube, Google Docs, Google Toolbar, Google Desktop and, of course, Gmail. This Mountain View, Calif.-based company was founded in 1998 and prides itself on maintaining a corporate culture that encourages creativity and community.

We believe the current trend of allocating additional dollars to internet search ads will continue, and that GOOGL is well-positioned to benefit from this trend. With its sophisticated search engine, GOOGL is able to match buyers proficiently to providers. Providers recognize the attractiveness of this service and are willing to pay for it. In addition, GOOGL’s incubated services, such as self-driving cars, could provide additional value to shareholders for the long-term.


 Top 10 Equity Holdings

Large Cap Growth

Alphabet, Inc. (Google, Inc.) 7.6%
Red Hat Inc. 4.9%
Marvell Technology Group 4.8%
Baxter International Inc. 4.6%
JP Morgan Chase & Co. 4.3%
Masco Corporation 4.2%
Fortive Corporation 3.9%
Mastercard Inc. 3.7%
Cognizant Technology 3.6%
Lincoln National 3.5%

Small Cap Core

Wintrust Financial 3.0%
Mastec Inc. 2.6%
Fortinet Inc. 2.6%
Pacific Premier Bancorp 2.4%
First Internet Bancorp 2.3%

Dividend Select

JP Morgan Chase & Co. 5.9%
Marvell Technology 4.1%
Principal Financial 3.9%
Las Vegas Sands Corp. 3.7%
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.