Weekly Investor – May 11, 2020
Stocks Move Higher
Stocks made a positive move to start off the month of May with the S&P 500® Index returning over 3.5%, the first positive move since mid-April. Despite stocks moving higher, job losses totaled 20.5 million to bring the unemployment rate to a level not seen since the Great Depression. One the economic front, the Consumer Price Index (CPI) and the Producer Price Index (PPI) will be released this week as investors digest the impact of the slowdown on both the economy and the stock market.
Investors leaned into risk and growth last week as the NASDAQ Composite Index rose nearly 6% for the week. Fortinet, Inc., IPG Photonics Corporation, and PayPal Holdings, Inc. were the top tech performers. Looking at returns through the size lens, small cap stocks outperformed mid caps which outperformed large caps. After a depressing first quarter, Energy stocks have rebounded off their March lows and lef all sectors last week. Fueling the Energy sector was the price of oil that rose almost $5 per barrel. Phillips 66 was the top energy stock in the S&P. With only 21 companies in the S&P 500 set to report this week, earnings season is winding down as almost 90% of the companies in the index have released their quarterly numbers.
The S&P 500 Index was up 3.5% for the week. Its top-performing sectors were Energy (8.3%) and Technology (6.6%), while the bottom-performing sectors were Consumer Staples (0.9%) and Utilities (0.5%). In the fixed-income market, the 10-year Treasury yield was up, ending at 0.7%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
United Rentals, Inc. is the world’s largest equipment rental company. The company rents industrial equipment such as trucks, forklifts, earth movers and homeowner equipment to industrial companies, utilities, municipalities and individuals. In addition to rentals, the company offers new and used equipment sales, servicing and safety training.
United Rentals is a dominant player in the industrial equipment rental market. The company is driving change with a new CEO who has implemented growth and profitability initiatives. As an economically sensitive company, United Rentals is impacted from the slowdown due to the coronavirus. Much of the pressure affecting the company is embedded in United Rentals’ depressed valuation. In addition, we believe the market is giving the company very little credit for the value of its equipment assets. For these reasons, we believe United Rentals fits with Argent’s Change-BasedSM investment approach.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet Inc. (Google) | 8.8% |
| Mastercard Incorporated | 5.7% |
| Apple, Inc. | 5.4% |
| Fiserv, Inc. | 5.2% |
| Target Corporation | 5.1% |
Small Cap Core
| Fortinet, Inc. | 4.1% |
| UFP Technologies, Inc. | 3.2% |
| Lumentum Holdings, Inc. | 3.0% |
| PRA Groupw, Inc. | 2.6% |
| Upland Software, Inc. | 2.5% |
Dividend Select
| Microsoft Corporation | 6.3% |
| Target Corporation | 5.8% |
| JPMorgan Chase & Co. | 5.0% |
| General Mills, Inc. | 4.3% |
| PepsiCo, Inc. | 3.6% |
Mid Cap
| NVIDIA Corporation | 4.3% |
| CDW Corporation | 4.1% |
| Ciena Corporation | 3.8% |
| Cintas Corporation | 3.8% |
| Zebra Technologies Corp. | 3.5% |
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.
