Weekly Investor – March 11, 2019
Global Growth Concerns
Equity markets were lower last week as fears of weaker global growth weighed on stocks. The European Central Bank (ECB) cut its 2019 real gross domestic product (GDP) growth target to 1.1% from its prior estimate of 1.7% last December. In the U.S., jobs data disappointed investors. Nonfarm payrolls grew only 25k compared to an expected 180k last month, an uncharacteristically low level. Despite the disappointing jobs number, wage growth remained strong, increasing 3.4% year-over-year. In addition, the unemployment rate of 3.8% remains historically low.
For stocks, the mixed economic data did not slow deal activity. Biogen Inc. announced its intent to acquire Nightstar Therapeutics for a 74% premium. On the earnings front, retail stocks had a string of weak results. Kroger Co. announced disappointing 4Q earnings as its profit margins were compressed. Ross Stores announced lower 2019 guidance. Burlington Stores fell over 11% after reporting a revenue miss and lower margins.
The S&P 500 Index® was down 2.2% for the week. Its top-performing sectors were Utilities (0.7%) and Real Estate (0.5%), while bottom-performing sectors were Energy (-3.9%) and Health Care (-3.9%). In the fixed-income market, the 10-year Treasury yield was down, ending at 2.6%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Changed-Based Investment
Willis Towers Watson (WLTW) is a multinational insurance broker, risk management and advisory company. It operates in more than 140 countries and is the third largest insurance broker in the world. Willis Towers Watson was formed as a merger between London based Willis Group Holdings plc and Virginia based Towers Watson & Co. in early 2016.
After a series of acquisitions and difficulty in integrating those acquisitions, Willis Towers Watson is showing traction in its goals for higher organic revenue growth and free cash flow generation. Additionally, we believe Towers Watson is well positioned to benefit from a growing economy. As companies grow, they look to the expertise of insurance brokers to assist in recommending benefits to employees and insuring their assets. Given these positive changes, we believe Willis Towers Watson fits with Argent’s Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.7% |
| Post Holdings, Inc. | 5.4% |
| Mastercard, Inc. | 4.7% |
| First Data Corporation | 4.4% |
| Fortive Corporation | 4.1% |
Small Cap Core
| Planet Fitness, Inc. | 3.0% |
| Fortinet Inc. | 2.9% |
| Merit Medical Systems | 2.8% |
| Wintrust Financial | 2.7% |
| Amphastar Pharma. | 2.6% |
Dividend Select
| JPMorgan Chase & Co. | 5.5% |
| ConocoPhillips | 4.2% |
| Pfizer Inc. | 4.1% |
| Target Corporation | 3.7% |
| Microsoft Corp. | 3.7% |
Mid Cap
| CDW Corporation | 3.4% |
| Cintas Corporation | 3.4% |
| Xilinx Inc. | 3.2% |
| Amedisys, Inc. | 3.2% |
| Ciena Corporation | 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.
