Weekly Investor – July 29, 2019
Earnings Season Continues
Last week the S&P 500® Index closed at an all-time high. Equities continue to perform well as growth in the U.S. economy remains positive. Gross Domestic Product (GDP) came in at 2.1% for the second quarter of 2019, ahead of economists’ expectations of 1.8%. While GDP growth has decelerated from the first quarter rate of 3.1% the economy continues to expand. This Wednesday the Federal Reserve is expected to cut the interest rate on its Fed Funds, another positive for the economy as the era of low-cost borrowing should be extended.
Second quarter earnings season continued last week as 150 companies in the S&P 500 Index announced quarterly results. Twitter announced it added five million active users and increased its full year revenue guidance. Those positives drove the stock up nearly 9% on Friday. Google announced 2Q revenues of $31.7B, beating Wall Street expectations. Google also announced it had increased headcount (an indication of future growth) and that the company’s profit margin improved. Google’s shares rose 10.5% for the week as a result of its strong earnings announcement. Not all was rosy in the market, however, as Align Technology dropped nearly 30% last week after lowering revenue guidance. Boeing fell over 8% after the company announced earnings that continue to be pressured by problems with its 737 Max airplanes. Looking ahead this week, earnings season continues as 168 companies in the S&P 500 Index are expected to release quarterly results.
The S&P 500 was up 1.7% for the week. Its top-performing sectors were Communication Services (4.6%) and Financials (2.7%), while bottom-performing sectors were Energy (-0.5%) and Utilities (-0.6%). In the fixed-income market, the 10-year Treasury yield was even, ending at 2.1%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
Huntsman Corporation (HUN) manufactures chemicals for the international plastics, automotive and construction industries. Based in The Woodlands, Texas, Huntsman was founded by Jon Huntsman Sr. in 1970.
Since late 2016, Huntsman has been transforming itself from a commodities chemical company to a specialty chemicals company. Successful completion of this change should drive higher profits and a higher valuation for the company. Huntsman began this transformation with the partial spin-off of its commodity and pigments business – Venator (VNTR) – announced in late 2016. We expect Huntsman will continue to adjust its product mix over time with the goal of becoming a specialty chemicals manufacturer. Given the positive, fundamental change the company is undergoing, we believe Huntsman fits our Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.7% |
| Post Holdings, Inc. | 5.6% |
| Mastercard, Inc. | 5.5% |
| Marvell Technology Group | 5.2% |
| First Data Corporation | 5.1% |
Small Cap Core
| Fortinet Inc. | 3.0% |
| Planet Fitness,Inc. | 2.9% |
| Upland Software Inc. | 2.8% |
| Wintrust Financial | 2.6% |
| World Fuel Services | 2.6% |
Dividend Select
| JPMorgan Chase & Co. | 5.7% |
| Marvell Technology Group | 4.7% |
| Microsoft Corp. | 4.4% |
| Pfizer Inc. | 4.0% |
| Target Corporation | 4.0% |
Mid Cap
| Cintas Corporation | 3.9% |
| CDW Corporation | 3.8% |
| Bright Horizons Family | 3.3% |
| Worldpay, Inc. | 3.3% |
| Amedisys, Inc. | 3.3% |
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.
