Weekly Investor – March 9, 2020
Coronavirus Dominates Market
Equities wavered between gains and losses before ultimately closing higher last week. Despite an emergency Federal Reserve rate cut of 50 basis points and Joe Biden’s strong showing on Super Tuesday, the coronavirus continues to dominate stock market moves. Investors fear global growth will be slowed or turn negative due to the virus as businesses cancel trips and pull back on spending. While the effect of the virus has yet to have a material impact on a number of economic indicators, many gauges still point to strong fundamentals in the economy. Job growth remains strong with 273,000 jobs created in February and an unemployment rate of 3.5%, matching a 50-year low.
In stock news, travel stocks were especially hard hit with Royal Caribbean Cruises Ltd. and other cruise operators declining sharply. Southwest Airlines Co. declined after announcing a drop in bookings will hurt first-quarter revenue. Energy and financials were the worst two sectors as falling travel demand hurts oil prices and the 10-year Treasury below 1% will likely reduce net interest margins for banks.
The S&P 500® Index was up 0.6% for the week. Its top-performing sectors were Utilities (7.9%) and Consumer Staples (6.2%), while the bottom-performing sectors were Financials (-4.1%) and Energy (-7.2%). In the fixed-income market, the 10-year Treasury yield was down, ending at 1.1%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
JPMorgan Chase & Co. is a financial holding company that provides financial services worldwide. Founded in 1823 and headquartered in New York, JPMorgan operates in several segments: investment banking, commercial banking, asset management, retail finance and credit card and auto finance.
JPMorgan emerged from the U.S. financial crisis with a solid balance sheet that provided its management team the opportunity to execute their business plan. As a result, JPMorgan was able to gain market share and improve its profitability. We believe JPMorgan is well-positioned to take advantage of a growing U.S. economy and has the potential to gain market share in Europe with the continued weakness in the continent’s financial system. Recent concern over the coronavirus has put pressure on interest rates. Likely, this will negatively impact the profitability of JPMorgan and all other banks. In addition, JPMorgan’s CEO Jamie Dimon, underwent emergency heart surgery. These issues will put near-term pressure on the shares of JPMorgan Chase.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 8.2% |
| Mastercard, Incorporated | 5.7% |
| Fiserv, Inc. | 5.3% |
| Post Holdings, Inc. | 5.1% |
| Apple, Inc. | 5.0% |
Small Cap Core
| Atkore International Group | 3.2% |
| UFP Technologies, Inc. | 3.1% |
| Fortinet, Inc. | 2.9% |
| OneMain Holdings, Inc. | 2.6% |
| Lumentum Holdings, Inc. | 2.6% |
Dividend Select
| JPMorgan Chase & Co. | 5.6% |
| Microsoft Corporation | 5.3% |
| Target Corporation | 5.1% |
| Life Storage, Inc. | 4.3% |
| Fidelity National Financial | 3.9% |
Mid Cap
| Amedisys, Inc. | 4.5% |
| Cintas Corporation | 4.4% |
| CDW Corporation | 3.9% |
| NVR, Inc. | 3.7% |
| NVIDIA Corporation | 3.4% |
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.
