Weekly Investor – March 25, 2019
Yield Curve Inversion
The S&P 500® Index ended last week lower after rallying mid-week. Investors initially were enthused Wednesday, after the Federal Reserve met and decided to keep the Federal Funds interest unchanged. Going into Friday, the bond market had a different view, as the yield curve, measured by the difference in interest rates between three-month Treasury Bill and the 10-year Treasury Bond, turned negative or inverted, for the first time since 2007. The inverted curve sent bank stock prices lower along with other economically sensitive sectors of the market, including Materials and Industrials.
The dollar advanced against most major currencies signaling global growth could be slowing. German purchasing manager data missed forecasts sending Germany’s 10-year bond yield below zero. This week several housing-related data points will be released along with trade, Gross Domestic Product (GDP) and job numbers.
The S&P 500 Index® was down -.0.8% for the week. Its top-performing sectors were Consumer Discretionary (1.2%) and Real Estate (0.9%), while bottom-performing sectors were Basic Materials (-2.0%) and Financials (-4.8%). In the fixed-income market, the 10-year Treasury yield was even, ending at 2.4%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Alphabet, Inc. Class A (GOOGL) has achieved worldwide name recognition with its famed Google search engine. Beyond this well-known service, the technology company also provides targeted advertising solutions (Google AdSense), collaboration tools for organizations (Google Apps), and a host of additional utilities such as Google Maps, YouTube, Google Docs, and Gmail. This Mountain View, California-based company was founded in 1998.
We believe the current trend of allocating additional dollars to internet search ads will continue, and that Alphabet is well-positioned to benefit from this trend. With its sophisticated search engine, Alphabet is able to match buyers to providers. Providers recognize the attractiveness of this service and are willing to pay for it. In addition, Alphabet’s incubated services, such as self-driving cars, could provide additional value to shareholders for the long term.
The combination of Alpabet’s current operations, coupled with potential future products, create a compelling addition to Argent’s Change BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
|Alphabet Inc. (Google)||8.1%|
|Post Holdings, Inc.||5.8%|
|First Data Corporation||4.4%|
Small Cap Core
|Planet Fitness, Inc.||3.1%|
|Merit Medical Systems||2.8%|
|G-III Apparel Group LTD||2.6%|
|Gray Television Inc.||2.6%|
|JPMorgan Chase & Co.||5.3%|
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.