Weekly Investor – May 21, 2018
Stocks Edge Lower for Week
Stocks fell for the week as investors grappled with higher bond yields, political risks around the globe, trade tensions and higher energy prices.
The Real Estate and Utilities sectors, which tend to fall in price as interest rates rise, lost more than 2% for the week. By contrast, the Materials and Energy sectors posted the biggest gains. In economic news, retail sales rose 0.3% in April, in line with forecasts, as higher paychecks from tax cuts offset rising fuel costs.
In stock news, Walmart and Cisco Systems fell after announcing quarterly results, despite both companies beating earnings expectations. Shares of Macy’s gained 14.6% for the week on strong earnings results as comparable sales increased by 4.2% and management increased full-year fiscal guidance. Despite missing estimates, Deere & Co. shares gained as the company announced price increases to offset higher freight and raw material costs.
With earnings season nearly in the books, the S&P 500® Index is on pace to grow earnings by 24% in the first quarter — the best results since 2011. In addition, earnings are expected to rise 22% for the year as a whole. While higher interest rates and inflation could provide some headwinds moving forward, it is most likely not enough to derail the market if domestic economic growth and earnings growth remain robust.
The S&P 500 was down -0.5% for the week. Its top-performing sectors included Basic Materials (1.6%) and Energy (1.5%), while bottom-performing sectors included Utilities (-3.2%) and Real Estate (-3.2%). In the fixed-income market, the 10-year Treasury yield was up for the week, ending at a little more than 3%.
We continue to seek companies that reflect our Change Based Investing(SM) approach.
Solid Prospects Ahead
First Data Corporation (FDC), headquartered in Atlanta, Georgia, is a global leader in e-commerce technology. The company processes almost 50% of all U.S. credit and debit transactions, including handling pre-paid gift cards.
Although First Data has struggled to turn itself around in the past, the company is realizing success, thanks in part to the efforts of CEO Frank Bisignano (former executive at JPMorgan Chase), who joined the company in 2013. Recently, First Data reported better-than-expected sales growth overall, particularly within its Global Business Solutions segment. Because of these significant positive changes, we feel First Data offers upside potential for our clients.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. | 7.2% |
| Red Hat Inc. | 5.5% |
| Baxter International | 4.8% |
| Marvell Technology | 4.4% |
| JP Morgan Chase & Co. | 4.1% |
Small Cap Core
| Wintrust Financial | 3.2% |
| Fortinet Inc. | 2.9% |
| Mastec Inc. | 2.4% |
| Lumentum Holdings Inc. | 2.3% |
| Merit Medical Systems | 2.3% |
Dividend Select
| JP Morgan Chase & Co. | 5.7% |
| Occidental Petroleum | 4.7% |
| ConocoPhillips | 4.3% |
| Las Vegas Sands Corp. | 4.0% |
| Marvell Technology Group | 3.8% |
Mid Cap
| NVIDIA Corporation | 3.3% |
| Cintas Corporation | 3.1% |
| NVR Inc. | 3.0% |
| E*Trade Financial Corp. | 2.9% |
| CDW Corporation | 2.9% |
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.
