Weekly Investor – April 9, 2018
Index Drops on Trade War Fears
The S&P 500® returned -1.4% last week, down for the third time in the past four weeks. Much of the negative performance and increased market volatility can be attributed to intensified concerns about a trade war between the U.S. and China. The back-and-forth between President Trump and China caused volatility to spike, particularly in industries such as semiconductors.
Turning to stock-specific news, INCYTE Corp., a large cap biotech firm, performed the worst in the S&P 500 after returning -23% for the week. The company announced its Phase III melanoma drug failed to show a statistically significant improvement in patients’ progression-free survival rates. Meanwhile, although no formal deal has been announced, it has been reported that CBS Corp. has made a bid for Viacom Inc. CBS spun off Viacom in 2006 and Sumner Redstone still owns significant portions of both companies.
Looking ahead to next week, quarterly earnings announcements are expected to start trickling in. The three U.S. mega-cap banks, Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co., are all expected to report quarterly results.
The S&P 500 Index was down 1.4% for the week. Its top-performing sectors included Energy (-0.1%) and Utilities (-0.1%), while bottom-performing sectors included Industrials (-2.0%) and Technology (-2.3%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.8%.
We continue to seek companies that reflect our Change Based InvestingSM approach.
Positive Changes Ahead
Cognizant Technology Solutions Corp. (CTSH), a New Jersey-based company, provides information technology and operations services worldwide.
In an effort to increase margins and capital return to shareholders, CTSH plans to implement a share buyback and dividend program. It also has refreshed its board of directors by electing new members. After a disappointing 2016, CTSH reported results that aligned with guidance and were better than overall market expectations. We view this positive change as a sign that the CTSH management team is able to refocus successfully on growth and returns. Additionally, the company’s current valuation reflects investor skepticism that the continuing change at the company will be successful.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. | 7.1% |
| Red Hat Inc. | 5.3% |
| Baxter International | 4.5% |
| Marvell Technology | 4.5% |
| JP Morgan Chase & Co. | 4.2% |
Small Cap Core
| Wintrust Financial | 3.0% |
| Fortinet Inc. | 2.9% |
| Lumentum Holdings | 2.3% |
| Mastec Inc. | 2.3% |
| First Internet Bancorp | 2.3% |
Dividend Select
| JP Morgan Chase & Co. | 5.8% |
| Principal Financial Group | 3.9% |
| Occidental Petroleum | 3.9% |
| Marvell Technology | 3.8% |
| ConocoPhillips | 3.8% |
Mid Cap
| NVIDIA Corporation | 6.1% |
| Applied Materials Inc. | 3.4% |
| NVR Inc. | 3.2% |
| 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.
