Weekly Investor – June 15, 2020
Second Wave Fears
Last week, equities fell for the first time in four weeks. Thursday, risks of a second wave of COVID-19 cases sent the S&P 500® Index down over 6.8%, as investors shed risky, economically sensitive cyclical names in sectors that included Energy, Financials and Industrials for relative safety in Information Technology and Communication Services. Friday, cyclical shares rose, but still ended the week in negative territory. An updated Fed dot plot released last week showed interest rate expectations near zero through 2022. The Federal Reserve is also continuing its large-scale asset purchases, trying to mitigate damage to the labor market.
In stocks, Starbucks Corporation issued preliminary earnings guidance for the third quarter below consensus expectations. At the same time, the company announced plans to close 400 stores over the next 18 months. Grubhub, Inc. and Netherlands-based Just Eat Takeaway.com N.V. announced the two companies would merge in an all-stock transaction. Grubhub had been in talks to combine with Uber Technologies, Inc., but Grubhub’s CEO said the Just Eat Takeaway offer was ‘much higher’ than the Uber proposal. Looking to this week, important economic releases include retail sales, jobless claims, housing starts and building permits. Investors will gauge just how fast an economic recovery can take place.
The S&P 500 Index was down 4.8% for the week. Its top-performing sectors were Technology (-2.0%) and Communication Services (-2.8%), while the bottom-performing sectors were Financials (-9.3%) and Energy (-11.1%). In the fixed-income market, the 10-year Treasury yield was down, ending at 0.7%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
AbbVie, Inc. is a U.S.-based pharmaceutical company founded in 2013. It originated as a spin-off from Abbott Laboratories. The company discovers, develops, manufactures and sells pharmaceutical products worldwide.
While it is widely known that AbbVie’s largest product, Humira, loses patent protection in 2023, recent new product launches, along with the acquisition of Allergan, a Dublin based pharmaceutical company, have changed the growth opportunities for the company. For AbbVie, the acquisition of Allergan holds the potential for durable growth into the next decade with its BOTOX® Cosmetic treatment for wrinkles. Additionally, political uncertainty and concerns over potential changes to the health care system have resulted in an attractive valuation for AbbVie making it a compelling addition to Argent’s Large Cap Strategy.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet, Inc. (Google) | 8.6% |
| Mastercard Incorporated | 5.7% |
| Apple, Inc. | 5.7% |
| Target Corporation | 5.0% |
| Danaher Corporation | 4.9% |
Small Cap Core
| Fortinet, Inc. | 3.7% |
| UFP Technologies, Inc. | 3.0% |
| Medpace Holdings, Inc. | 2.9% |
| PetIQ, Inc. | 2.8% |
| PRA Group, Inc. | 2.7% |
Dividend Select
| Microsoft Corporation | 6.1% |
| Target Corporation | 5.6% |
| JPMorgan Chase & Co. | 5.2 |
| Marvell Technology Group | 3.8% |
| Truist Financial Corp | 3.7% |
Mid Cap
| NVIDIA Corporation | 4.6% |
| Cintas Corporation | 4.2% |
| CDW Corporation | 4.0% |
| Ciena Corporation | 3.9% |
| Marvell Technology Group | 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.
