Weekly Investor – January 14, 2019
Another Positive Week
With the backdrop of positive economic data, the S&P 500® Index was up 2.5% last week, while the VIX index (a popular volatility measure) fell for the first time since early December. U.S./Chinese trade news was positive after high-level trade talks concluded, the first since the G20 summit last November. Tuesday, FOMC notes from the Federal Reserve’s December meeting were released. Several officials indicated that given “muted inflation pressures” the committee could “afford to be patient” on future rate hikes. These dovish comments have been well received by equity markets.
In stock news, PG&E Corp. spiraled down -28% last week after bankruptcy fears spiked after the beleaguered California utility saw its debt downgraded to junk by Standard & Poor’s. Netflix Inc. was a top performing name, gaining 13.4% last week. Multiple analysts upgraded the streaming video provider ahead of next week’s expected fourth quarter results. General Motors and Ford were up over 9% last week after GM said 2018 profits exceeded its expectations. General Electric Co. has been gaining momentum, returning 8.6% last week on expectations that selling its Capital Aviation Service business could unlock ~$25b in cash and help stabilize the company’s balance sheet.
The S&P 500 was up 2.5% for the week. Its top-performing sectors were Industrials (4.1%) and Real Estate (4.0%), while bottom-performing sectors were Utilities (0.8%) and Consumer Staples (0.6%). In the fixed-income market, the 10-year Treasury yield was even, ending at 2.7%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change-Based Investment
Marvell Technology Group Ltd. (MRVL) designs, develops and markets semiconductors. Marvell is the market leader in data storage solutions. Marvell was founded in 1995 and is headquartered in Hamilton, Bermuda.
Activist investor Starboard has brought dramatic changes to Marvell since early 2016. Starboard forced out Marvell’s management team and brought in a new CEO, Matt Murphy. Murphy had a solid track record prior to Marvell and has quickly put together a new management team of successful industry veterans. Since Murphy’s arrival, Marvell has delivered significant improvements to profits by implementing discipline on costs and product portfolios and focus on research and development spending. In July 2018, Marvell acquired the semiconductor manufacturer Cavium to increase Marvell’s exposure to networking. This should drive further profit improvements and return the company to revenue growth. Given these changes, we believe Marvell’s new management team embraces Argent’s Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.9% |
| Post Holdings, Inc. | 5.9% |
| Mastercard, Inc. | 4.6% |
| JP Morgan Chase & Co. | 4.0% |
| Marvell Technology | 3.9% |
Small Cap Core
| Fortinet Inc. | 3.2% |
| Planet Fitness Inc. | 2.9% |
| Wintrust Financial Corp. | 2.9% |
| Merit Medical Systems | 2.7% |
| Amphastar Pharma. | 2.6% |
Dividend Select
| JPMorgan Chase & Co. | 5.6% |
| Pfizer, Inc. | 4.6% |
| ConocoPhillips | 4.5% |
| Occidental Petroleum | 4.0% |
| Life Storage, Inc. | 3.6% |
Mid Cap
| Amedisys, Inc. | 3.5% |
| Cintas Corporation | 3.2% |
| CDW Corporation | 3.2% |
| Ciena Corporation | 3.1% |
| NVR, Inc. | 2.8% |
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.
