Weekly Investor – April 16, 2018
Oil Notches Gain Along with Energy
Oil and Treasury yields moved inversely to each other last week, while the stock market balanced domestic and foreign risks. Oil rose each day to close over $67 a barrel – the highest level since December 2014 – while energy stocks in the S&P 500® rose 6%.
Banks began reporting quarterly results last week. JP Morgan topped analyst expectations, but indicated increased competition could hinder future growth in the industry. Citigroup Inc. also reported better-than-expected earnings but proceeded to fall after cautious comments by JP Morgan CEO Jamie Dimon.
External risk factors have continued to weigh on investors’ minds as well. Political havoc surrounding President Trump’s Twitter comments about military action in Syria, involvement with Russia, trade tensions with China, and rumors the U.S. will rejoin the Trans-Pacific Partnership (TPP) are making investors question which way U.S. companies will position themselves for the future.
The dollar also declined slightly for the week, although it has remained relatively stable since the drop in January. Looking ahead to next week, Financials will be in focus as more banks are set to report quarterly results.
The S&P 500 Index was up 2% for the week. Its top-performing sectors included Energy (6%) and Technology (3.7%), while bottom-performing sectors included Real Estate (-1.2%) and Utilities (-1.3%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.8%.
We continue to seek companies that reflect our Change Based InvestingSM approach.
Improved Focus, Possibilities
ConocoPhillips (COP) is a major oil exploration and production company based in Houston, Texas. COP was formed in August 2002 when Phillips Petroleum acquired Conoco Inc.
COP is going through several changes. The company is focusing on a more disciplined approach to oil production. Additionally, it has pledged to maintain a high-quality balance sheet and double free cash flow by 2020, and it plans to return a portion of this cash flow to investors in the form of dividends and share repurchases. We believe the company stands to benefit from its focus on a disciplined approach to oil production, higher cash flows and improving returns to shareholders. Further, COP’s goal of doubling free cash flow remains underappreciated by Wall Street; thus, we feel COP offers favorable odds for our clients.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. | 7.1% |
| Red Hat Inc. | 5.5% |
| Marvell Technology | 4.7% |
| Baxter International | 4.5% |
| JP Morgan Chase & Co. | 4.1% |
Small Cap Core
| Wintrust Financial | 3.1% |
| Fortinet Inc. | 2.9% |
| Lumentum Holdings | 2.5% |
| Pacific Premier Bancorp | 2.3% |
| First Internet Bancorp | 2.3% |
Dividend Select
| JP Morgan Chase & Co. | 5.7% |
| Occidental Petroleum | 4.1% |
| ConocoPhillips | 4.0% |
| Marvell Technology | 4.0% |
| Principal Financial Group | 3.8% |
Mid Cap
| NVIDIA Corporation | 6.4% |
| Applied Materials Inc. | 3.6% |
| NVR Inc. | 3.1% |
| Cintas Corporation | 2.9% |
| Globus Medical Inc. | 2.7% |
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.
