Weekly Investor – September 24, 2018
S&P Rises as Economic Climate Remains Strong
Despite the S&P 500® Index closing lower last Monday, it finished Thursday at an all-time high before dipping slightly on Friday. Equities were led by the Financial and Materials sectors against the backdrop of rising interest rates. Conversely, higher bond yields stunted the Real Estate and Utilities sectors, with both underperforming the market.
President Trump decided to move forward with an additional 10% tariff on $200 billion in Chinese imports. The White House had discussed moving the tariffs up to 25%, but it appears that has been delayed until next year, in an effort to get the Chinese back to the negotiating table.
Overall, economic fundamentals in the U.S. remain strong, corporate profits are robust and are expected to grow from here. The S&P 500 is projected to grow earnings by 5.4% next quarter and 21.8% for the year as a whole.
The S&P 500 Index was up 0.8% for the week. Its top-performing sectors included Basic Materials (2.3%) and Financials (2.3%), while bottom-performing sectors included Real Estate (-0.4%) and Utilities (-1.5%). In the fixed-income market, the 10-year Treasury yield was up, ending at nearly 3.1%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Apple Takes a Bite Out of Change
Apple Inc. (AAPL) designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players and related products.
Apple stands to benefit from higher iPhone revenues, driven by demand for more expensive phones. Apple also has maintained strong growth in its high-margin Services segment by generating revenue from offerings such as the App Store, iTunes, Apple Music, iCloud and Apple Pay, among others. Given the changes in tax law, Apple has access to $163 billion it can use for dividends, share buybacks, internal investments or acquisitions. We expect Apple will use its excess cash to generate shareholder value. Given these positive changes, we believe Apple fits Argent’s Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.4% |
| Post Holdings Inc. | 5.2% |
| Baxter International | 5.0% |
| Mastercard Inc. | 4.5% |
| First Data Corporation | 4.2% |
Small Cap Core
| Fortinet Inc. | 3.6% |
| Health Ins. Innovations | 3.0% |
| Wintrust Financial Corp. | 2.9% |
| PetIQ Inc. | 2.6% |
| Merit Medical Systems | 2.5% |
Dividend Select
| JP Morgan Chase & Co. | 5.8% |
| ConocoPhillips | 4.5% |
| Occidental Petroleum | 4.2% |
| Pfizer Inc. | 4.1% |
| Target Corporation | 4.0% |
Mid Cap
| Cintas Corporation | 3.3% |
| NVIDIA Corporation | 3.3% |
| NetApp Inc. | 3.3% |
| CDW Corporation | 3.1% |
| Amedisys Inc. | 3.0% |
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.
