Weekly Investor – November 5, 2018
A Return to Positive Territory
Stocks started off the third quarter down almost 7% through Halloween. Last week brought stocks back from their lows as the S&P 500® returned 2.45% last week. A three-day rally, starting on Tuesday, retreated on Friday after President Trump gave mixed statements on a potential trade deal with China.
Apple released quarterly earnings on Thursday that sent shockwaves through the technology indexes after a disappointing outlook for iPhone sales growth. Despite the top-heavy tech sector being one of the worst performing sectors in the S&P 500, Red Hat Inc was the top performing stock in the index after IBM announced it will acquire the company for a 54% premium. The $31 billion-dollar deal is expected to close by the end of 2019.
Going forward, the market will be looking for guidance from Washington as both sides of the aisle brace for a possible split decision that would have the House going to the Democrats and the Republicans holding on to the Senate majority. Looking past next Tuesday, initial jobless claims followed by the Federal Reserve’s Open Market Committee meeting will be waiting for investors after the dust settles from the midterm elections.
The S&P 500 was up 2.4% for the week. Its top-performing sectors were Basic Materials (6.1%) and Financials (4.4%), while bottom-performing sectors were Technology (1.0%) and Utilities (-0.6%). In the fixed-income market, the 10-year Treasury yield was up, ending at 3.2%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Underappreciated Change
ConocoPhillips (COP) is a major oil exploration and production company based in Houston, Texas. The company was formed in August 2002 when Phillips Petroleum acquired Conoco Inc.
ConocoPhillips 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 to double free cash flow by 2020. In addition, the company plans to return a portion of its cash flow to investors in the form of dividends and share repurchases. We believe these changes remain underappreciated by Wall Street; thus, we feel the stock fits well with Argent’s Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.6% |
| Post Holdings, Inc. | 5.1% |
| MasterCard, Inc. | 4.5% |
| Target Corporation | 4.2% |
| JP Morgan Chase & Co. | 4.2% |
Small Cap Core
| Fortinet, Inc. | 2.8% |
| Wintrust Financial Corp. | 2.8% |
| Merit Medical Systems | 2.7% |
| Health Ins. Innovations | 2.7% |
| Premier, Inc. | 2.6% |
Dividend Select
| JPMorgan Chase & Co. | 5.8% |
| ConocoPhillips | 4.4% |
| Pfizer, Inc. | 4.4% |
| Target Corporation | 4.2% |
| Occidental Petroleum | 3.9% |
Mid Cap
| CDW Corporation | 3.3% |
| NetApp Inc. | 3.2% |
| Cintas Corporation | 3.1% |
| Globus Medical, Inc. | 3.0% |
| 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.
