Weekly Investor – August 5, 2019
Worst Week of 2019
Stocks had their worst week of 2019 last week. After trading slightly down on Monday and Tuesday, stocks moved sharply lower on Wednesday after the Federal Reserve cut interest rates by 0.25%. President Donald Trump followed up on Thursday with the announcement of additional tariffs on China. The one-two punch of uncertain rate cuts by the Fed and a volatile trade relationship with China caused stocks to dip lower to end the week. The weekly move in stocks was the sharpest drop since December 2018. The two sectors hit the hardest by the renewed trade rhetoric were Consumer Discretionary and Information Technology. Both groups have heavy exposure to international trade and increased costs from higher tariffs will weigh on profitability. Financial stocks also had a down week as lower interest rates will pressure lending profitability. On the other end of the interest rate spectrum, Real Estate and Utilities led the market as investors continues to search for yield in this lower rate environment. Deal activity lifted Health Care stocks after Mylan and Pfizer agreed to combine their generics businesses to create a new global pharmaceutical company. This week, the markets will be listening to talks of trade, nuclear pacts with China and Russia, and earnings from 65 companies in the S&P 500® Index.
The S&P 500 was down 3.1% for the week. Its top-performing sectors were Real Estate (2.0%) and Utilities (0.3%), while bottom-performing sectors were Technology (-4.4%) and Consumer Discretionary (-4.6%). In the fixed-income market, the 10-year Treasury yield was down, ending at 1.9%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
Incyte Corporation (INCY) is a biopharmaceutical firm specializing in oncology drugs. Incyte went public in 1993 and is based in Delaware.
Incyte has an established base business anchored by its lead cancer drug, Jakafi, which entered blockbuster status by surpassing $1 billion in sales. Jakafi has the long-term potential of reaching $2.5-$3.0 billion in sales, offering substantial growth for the company. Additionally, Incyte has a pipeline of late stage drugs that provide the potential to fuel growth for the company beyond the next decade. Incyte shareholders could benefit as more mature, larger pharmaceutical companies look to acquire smaller companies like Incyte to accelerate their growth. This wave of consolidation is a positive change for the industry.
With the current and future sales potential of Jakafi and a pipeline of late stage drug candidates, Incyte offers a compelling opportunity for our clients.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.7% |
| Mastercard, Inc. | 5.5% |
| Post Holdings, Inc. | 5.3% |
| Fiserv, Inc. | 5.3% |
| Marvell Technology | 4.9% |
Small Cap Core
| Fortinet Inc. | 3.1% |
| Planet Fitness,Inc. | 2.9% |
| OneMain Holdings, Inc. | 2.7% |
| Upland Software Inc. | 2.6% |
| Wintrust Financial | 2.5% |
Dividend Select
| JPMorgan Chase & Co. | 5.8% |
| Marvell Technology Group | 4.5% |
| Microsoft Corp. | 4.4% |
| Target Corporation | 3.9% |
| Fidelity National Financial | 3.8% |
Mid Cap
| Cintas Corporation | 4.0% |
| CDW Corporation | 4.0% |
| Amedisys, Inc. | 3.4% |
| Bright Horizons Family | 3.3% |
| NVR, Inc. | 3.2% |
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.
