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Weekly Investor

Weekly Investor – August 19, 2019

19 August 2019

Yield Curve Inversion

The S&P 500® Index finished lower in a volatile week.  Long term interest rates briefly fell below short term interest rates during the week, an unusual occurrence known as ‘yield curve inversion.’  This has been a precursor to recessions in the past.  One of the factors that drove the brief inversion was weak economic data out of China and Germany, fueling fears of a coming recession. At least in part because of the inversion of the yield curve, investors sold down stocks during the week. Despite the continued trade-war rhetoric and more volatile markets, the consumer remains a bright spot with retail sales advancing by 0.7% versus expectations of a 0.3% gain. Looking ahead, investors will be focused on this week’s Federal Reserve meeting to gain clues on the direction of interest rates.

With earnings season coming to a close, a couple of bellwethers reported results. Walmart rose after increasing its full-year guidance and reporting an increase in comparable-store-sales of 2.8%. By contrast, shares of Cisco Systems fell by over 8% after announcing disappointing results on a weak outlook due to the U.S.-China trade war and slower global growth. Several retailers are set to report earnings this week, including Home Depot, Target and Gap.

The S&P 500 was down 1.0% for the week. Its top-performing sectors were Consumer Staples (1.6%) and Utilities (0.5%), while the bottom-performing sectors were Financials (-2.2%) and Energy (-3.9%). In the fixed-income market, the 10-year Treasury yield was down, ending at 1.6%.

We continue to seek companies that reflect our Change-BasedSM investment approach.


Change Based Investment

Marvell Technology Group Ltd. designs, develops and markets semiconductors.  Marvell is the market leader in data storage solutions. Customers include computer manufacturers, automobile makers, major mobile networks and internet retail and server sites. Marvell was founded in 1995 and is headquartered in Hamilton, Bermuda.

In 2016 Marvell brought in a new Chief Executive Officer, Matt Murphy. Murphy had a solid track record prior to taking over Marvell and has quickly put together a new management team of successful industry veterans. Since Murphy’s arrival, Marvell has delivered significant improvements in profits by implementing discipline on costs and product portfolios and focusing on research and development spending. In July 2018, Marvell acquired the semiconductor manufacturer Cavium to increase Marvell’s exposure to networking. This acquisition should drive further profit improvements and assist the company with 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) 7.7%
Mastercard, Inc. 5.7%
Fiserv, Inc. 5.5%
Post Holdings, Inc. 5.1%
Marvell Technology 5.0%

Small Cap Core

Fortinet Inc. 3.0%
Vonage Holdings Corp. 2.7%
Upland Software Inc. 2.6%
World Fuel Services 2.6%
Planet Fitness, Inc. 2.6%

Dividend Select

JPMorgan Chase & Co. 5.6%
Marvell Technology Group 4.5%
Microsoft Corporation 4.5%
Target Corporation 4.1%
Fidelity National Financial 4.0%

Mid Cap 

Cintas Corporation 4.2%
CDW Corporation 3.9%
Bright Horizons Family 3.6%
Amedisys, Inc. 3.4%
NVR, 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.