Weekly Investor – March 23, 2020
Market Volatility Continues
The S&P 500® Index fell nearly 15% last week, posting its worse loss since October 2008. Last Monday alone the market’s one-day drop of 12% came close to matching 1929’s Black Monday decline of 12.9%. The volatility in the market stems from concerns over the coronavirus, as reports of new cases and new geographies continue. In addition to new cases, reports of closures made news as individual states try to clamp down on the spread of the virus. At the end of the week the governors of New York and California issued orders that all non-essential workers stay home. Reacting to the expected slowdown in the world economies and the decision by Saudi Arabia to boost oil production, crude oil fell 29% in the week. Estimates for U.S. Gross Domestic Product (GDP) are being cut aggressively. Goldman Sachs now expects a decline of 24% in the second quarter of the year, with emerging supply chain disruptions and fallout from consumers as they cut back on travel, entertainment and dining.
Responding to the weakness in the economy, the Federal Reserve announced emergency rate cuts, along with the revival of asset purchases and other financial crisis era programs. On fiscal policy, the GOP leadership in the Senate proposed a $1.3T stimulus package. This week investors will continue to watch for updates on the coronavirus as well as governmental responses across the globe.
The S&P 500 Index was down 15% for the week. Its top-performing sectors were Consumer Staples (-11.3%) and Communication Services (-12.2%), while the bottom-performing sectors were Energy (-19.6%) and Real Estate (-23.0%). In the fixed-income market, the 10-year Treasury yield was even, ending at 0.9%.
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.
Activist investor Starboard has brought dramatic changes to Marvell since early 2016. Starboard forced our Marvell’s management team and brought in a new CEO, 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 to profits by implementing discipline on costs and product portfolios and focus 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 return revenue growth. Given these changes, we believe that Marvell’s new management team embraces Argent’s Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 8.8% |
| Target Corporation | 5.6% |
| Mastercard, Incorporated | 5.5% |
| Fiserv, Inc. | 5.3% |
| Apple, Inc. | 5.2% |
Small Cap Core
| Fortinet, Inc. | 3.3% |
| UFP Technologies, Inc. | 3.2% |
| Lumentum Holdings, Inc. | 3.0% |
| Atkore International Group | 2.6% |
| Murphy USA Inc. | 2.5% |
Dividend Select
| Target Corporation | 6.1% |
| Microsoft Corporation | 5.8% |
| JPMorgan Chase & Co. | 5.6% |
| General Mills, Inc. | 4.8% |
| Comcast Corporation | 3.9% |
Mid Cap
| Amedisys, Inc. | 6.2% |
| Cintas Corporation | 4.0% |
| CDW Corporation | 4.0% |
| Ciena Corporation | 3.8% |
| NVIDIA Corporation | 3.7% |
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.
