Weekly Investor – January 21, 2020
Phase One Signed
Stocks closed out another week at all-time highs. Positive economic data from the U.S. and China, coupled with easing trade tensions lifted the markets. With the phase one trade agreement signed, investors are focused on corporate profits and the management outlook for 2020. Outside of the U.S., emerging markets rallied for the seventh straight week.
Stocks of note last week included Albermarle Corporation, which returned over 12.0% after China signaled it would not cut subsidies for electric vehicles. The company’s main line of business is the production of lithium, a key component in batteries used in electric vehicles. In the financial sector, Morgan Stanley reported a better-than-expected quarter. The CEO, James Gorman, is keeping costs under control with a move to reduce the company’s global workforce by 2.0%. Wells Fargo & Company and The Bank of New York Mellon Corp. also reported last week. The two companies rounded out the bottom performing holdings in the S&P 500® Index after struggling to keep deposit costs down. From the sector perspective, both growth and defensive stocks sat at the top of the leader board. Utilities and Technology stocks were both up around 3.0% for the week as the S&P 500 moved up 2.0%. The lone negative sector, at -1.1%, was Energy after oil fell on lessened tensions in the Middle East. Looking ahead to this week, 43 more earnings reports will be released by S&P 500 companies. On the economic calendar. home sales and jobs numbers will shape the views of investors.
The S&P 500 Index was up 2.0% for the week. Its top-performing sectors were Utilities (3.8%) and Technology (3.0%), while the bottom-performing sectors were Consumer Discretionary (1.1.%) and Energy (-1.1%). In the fixed-income market, the 10-year Treasury yield was even, ending at 1.8%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
D.R. Horton, Inc. is a home builder headquartered in Arlington, Texas. The company is one of the largest home builders 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) | 8.1% |
| Mastercard, Incorporated | 5.6% |
| Fiserv, Inc. | 5.2% |
| Post Holdings, Inc. | 5.0% |
| Apple, Inc. | 4.8% |
Small Cap Core
| Fortinet, Inc. | 3.2% |
| Atkore International Group | 2.9% |
| OneMain Holdings, Inc. | 2.6% |
| Callaway Golf Company | 2.6% |
| World Fuel Services | 2.5% |
Dividend Select
| JPMorgan Chase & Co. | 6.2% |
| Target Corporation | 4.9% |
| Microsoft Corporation | 4.8% |
| Comcast Corporation | 3.7% |
| Fidelity National Financial | 3.7% |
Mid Cap
| CDW Corporation | 4.2% |
| Amedisys, Inc. | 4.0% |
| Cintas Corporation | 3.9% |
| Copart, Inc. | 3.5% |
| 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.
