Weekly Investor – October 7, 2019
Mixed Economic Data
U.S. stocks moved lower last week amid worries about a possible economic downturn. Losses were driven by a lower than expected reading of 47.8 for the ISM Manufacturing Index, the lowest value since June 2009. Readings above 50 signal an expansion in manufacturing activity, while readings below 50 signal contraction. This was the second consecutive month with a reading below 50, stoking concern of an economic slowdown in manufacturing. In other economic data, 136,000 jobs were added in September but missed economists’ expectations of 145,000. In addition, the ISM Non-Manufacturing Index fell to 52.6 but remained in expansionary territory.
In stock news, discount online brokers fell after The Charles Schwab Corporation announced zero commissions on trades, a move that was quickly followed by key competitors. Shares of Delta Air Lines, declined after the company raised its estimated non-fuel cost for next quarter on bad weather, higher volumes and increased labor costs. On the positive side, homebuilder Lennar gained after issuing higher guidance and beating earnings estimates on strong orders from the West. Looking ahead, potential trade deals and geopolitical concerns are likely to remain key drivers this week as Chinese Vice Premier Liu He will be in Washington to negotiate on trade. Earnings season will kick-off at the end of the week and into next week with a number of major banks announcing results.
The S&P 500® Index was down 0.3% for the week. Its top-performing sectors were Technology (1.1%) and Health Care (0.9%), while bottom-performing sectors were Basic Materials (-2.5%) and Energy (-3.8%). In the fixed-income market, the 10-year Treasury yield was down, ending at 1.5%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
Target Corporation is the second-largest general merchandise retailer in the United States, selling products through its physical stores as well as its digital channels. Based in Minneapolis, Minnesota, the company was founded in 1902 as Goodfellow Dry Goods.
Target is in the midst of several changes. It is resetting its pricing strategy to close the gap with Walmart, its biggest competitor, and is addressing its e-commerce needs by rolling out same-day delivery in selected markets around the country. We believe these changes will increase same-store sales for Target and will drive a higher valuation for it stock. For these reasons, we believe Target fits well with Argent’s Change-BasedSM investment approach,
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 7.7% |
| Mastercard, Inc. | 5.5% |
| Fiserv, Inc. | 5.3% |
| Post Holdings, Inc. | 5.3% |
| Target Corporation | 4.8% |
Small Cap Core
| Fortinet, Inc. | 2.9% |
| World Fuel Services | 2.8% |
| Atkore International Group | 2.8% |
| Callaway Golf Company | 2.5% |
| OneMain Holdings, Inc. | 2.4% |
Dividend Select
| JPMorgan Chase & Co. | 5.7% |
| Target Corporation | 5.0% |
| Microsoft Corporation | 4.3% |
| Marvell Technology Group | 4.2% |
| Fidelity National Financial | 3.9% |
Mid Cap
| CDW Corporation | 4.2% |
| Cintas Corporation | 4.1% |
| NVR, Inc. | 3.5% |
| Copart, Inc. | 3.3% |
| Amedisys, 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.
