Weekly Investor – May 28, 2019
The Slide Continues
After climbing over 18% in the first four months of 2019, the S&P 500® Index has fallen in the month of May, recording three straight weeks of declines. The index declined 1.1% last week and has dropped 3.9% thus far in May. Much of the downside pressure has come from the intensification of the trade conflict between United States and China. The increased strain on trade between the two largest economies in the world could have a negative effect on consumer sentiment and commercial spending, thereby increasing the risk of economic growth decelerating.
The information technology sector has been under pressure since the United States Department of Commerce added Chinese telecom networking giant Huawei to a list of companies requiring special licenses to buy parts from US suppliers, potentially impacting US semiconductor suppliers. On the positive side, general merchandising giant Target Corp, was the week’s best performing stock in the S&P 500 Index climbing 15.1%. The stock jumped last Wednesday after a positive first quarter earnings announcement which beat expectations.
The S&P 500® Index was down –1.2% for the week. Its top-performing sectors were Utilities (1.7%) and Health Care (1.2%), while bottom-performing sectors were Technology (-2.8%) and Energy (-3.4%). In the fixed-income market, the 10-year Treasury yield was down, ending at 2.3%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Positive Changes
D.R. Horton is a home builder headquartered in Arlington, Texas. In 2017, the company was the largest home builder in the United States based on the number of homes closed. The company operates three separately branded divisions: Express Homes for entry-level buyers, Emerald Homes for the luxury buyer and Freedom Homes which cater to an adult community aged 55 and over.
D.R. Horton has made a change to its strategy by reducing the amount of inventory in land it owns, which should help improve the company’s cash flow. Additionally, D.R. Horton focuses on entry-level homes, which is currently the highest demand segment of new home construction. D.R. Horton also trades at an attractive valuation. The company’s strategy change along with positive industry demand creates upside potential for our clients.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.6% |
| Post Holdings, Inc. | 5.8% |
| Mastercard, Inc. | 5.3% |
| Marvell Technology Group | 4.5% |
| First Data Corporation | 4.5% |
Small Cap Core
| Upland Software Inc, | 3.0% |
| Planet Fitness, Inc. | 2.9% |
| Fortinet Inc. | 2.8% |
| Wintrust Financial | 2.7% |
| Amphastar Pharma. | 2.4% |
Dividend Select
| JPMorgan Chase & Co. | 5.7% |
| Pfizer Inc. | 4.2% |
| Microsoft Corp. | 4.2% |
| Marvell Technology Group | 4.0% |
| Target Corporation | 4.0% |
Mid Cap
| CDW Corporation | 3.7% |
| Cintas Corporation | 3.7% |
| NVR, Inc. | 3.2% |
| Worldpay Inc. | 3.2% |
| Bright Horizons Family | 3.1% |
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.
