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News & Our Thinking

Weekly Investor

Weekly Investor – January 6, 2020

06 January 2020

Geopolitical Concerns

The S&P 500® Index closed out 2019 last Tuesday with a 31.5% return. 2019’s performance was second only to 2013’s 32.4% return over the past ten years. For the decade, which also ended last Tuesday, the index posted a 256% return, equivalent to a 13.5% average annual return.

For the week, the S&P 500 Index declined less than 1.0%. Last Thursday, stocks rose 0.9%. Friday morning brought reports that the United States had carried out a drone strike on an Iranian military leader and an Iraqi militia leader, leading to retaliatory threats from Iran. Equities opened lower over those geopolitical concerns and closed down 0.7% for the day. Defense stocks such as Northrup Grumman Corporation, Lockhead Martin Corporation and Huntington Ingalls Industries, Inc. rose on the news of military action. Similarly, oil stocks like Occidental Petroleum Corporation, Concho Resources, Inc. and Hess Corporation gained on Friday. Crude oil climbed 3.1% on the day, closing at $63.05 per barrel, gaining 2.2% for the week.

The S&P 500® Index was down 0.2% for the week. Its top-performing sectors were Industrials (1.1%) and Energy (0.8%), while the bottom-performing sectors were Consumer Staples (-1.4%) and Basic Materials (-2.5%). In the fixed-income market, the 10-year Treasury yield was down, ending at 1.8%.

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


Change Based Investment

ConocoPhillips is a major oil exploration and production company based in Houston, Texas. The company was formed in August 2002 when Phillips Petroleum acquired Conoco, Inc.

ConocoPhillips is going through several changes. The company is focusing on a more disciplined approach to oil production. Additionally, it has pledged to maintain a high-quality balance sheet and to double free cash flow by 2020. In addition, the company plans to return a portion of its cash flow to investors in the form of dividends and share repurchases. We believe ConocoPhillips stands to benefit from its focus on a disciplined approach to oil production, higher cash flows and improving returns to shareholders. Although the energy sector has come under pressure over concerns of a global economic slowdown and record oil production in the United States, we believe ConocoPhillips’ goal of doubling free cash flow remains underappreciated by Wall street.

 

Top 5 Equity Holdings


Large Cap Growth

Alphabet Inc. (Google) 7.7%
Mastercard, Incorporated 5.4%
Fiserv, Inc. 5.2%
Post Holdings, Inc. 5.0%
Target Corporation 4.9%

Small Cap Core

Fortinet, Inc. 3.1%
Atkore International Group 2.9%
World Fuel Services 2.7%
OneMain Holdings, Inc. 2.6%
Callaway Golf Company 2.5%

Dividend Select

JPMorgan Chase & Co. 6.3%
Target Corporation 5.3%
Microsoft Corporation 4.6%
ConocoPhillips 3.6%
Fidelity National Financial 3.6%

Mid Cap 

CDW Corporation 4.4%
Cintas Corportaion 3.8%
Amedisys, Inc. 3.8%
Copart, Inc. 3.4%
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.