Weekly Investor – August 17, 2020
Earnings Season Winds Down
Last week the S&P 500® Index rose, led by value stocks that have been lagging through the year. Top performers included cruise lines, like Royal Caribbean Group and Norwegian Cruise Line Holdings Ltd., along with some of the gaming stocks, like Wynn Resorts, Limited and MGM Resorts International. Driving these stocks upward last week was, in part, better news on the pandemic front. Seven-day average positive COVID-19 tests fell to 54,503 on Friday, from a high of 69,190 on July 25th, or a ~22.0% reduction.
Earnings season began to wind down as only 13 companies in the S&P 500 announced quarterly results last week. Among those announcing quarterly results was Simon Property Group, Inc., one of the largest mall real estate investment trusts (REITs). Simon announced earnings that beat analyst estimates along with positive guidance that pushed the stock up 9.6%. Royal Caribbean posted poor quarterly results but managed to rally 16.0% after announcing surprisingly strong 2021 bookings. On the less positive side, Cisco Systems, Inc. fell over 10.0% for the week after announcing poor quarterly results, as hardware sales fell due to delayed customer orders. Cisco’s results highlight the financial weakness that many small and mid-size firms are feeling from the pandemic and consequent economic shutdown.
The S&P 500 Index was up 0.6% for the week. Its top-performing sectors were Industrials (3.1%) and Energy (2.3%), while the bottom-performing sectors were Real Estate (-1.8%) and Utilities (-2.1%). 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
Crown Castle International Corp. operates as a real estate investment trust. Crown Castle owns, operates and leases cell towers and other infrastructure for wireless communications. The company was founded in 1994 and is headquartered in Houston, Texas.
Recently, Crown Castle took a different strategy than its main competitors. In addition to owning cell towers, Crown Castle began investing in small cell and fiber networks- a new way of expanding its wireless coverage. This change is important as wireless carriers roll out new 5G (the next generation of wireless connectivity) infrastructure. With the build-out of the 5G market, increasing demand for small cell networks and Crown Castle’s record of solid execution, we believe the company has a long runway for sustainable sales.
Top 5 Equity Holdings
Large Cap Growth
| Alphabet, Inc. (Google) | 8.2% |
| Apple, Inc. | 6.9% |
| Mastercard Incorporated | 5.6% |
| Danaher Corporation | 5.4% |
| Target Corporation | 5.2% |
Small Cap Core
| Medpace Holdings, Inc. | 3.9% |
| Fortinet, Inc. | 3.2% |
| UFP Industries, Inc. | 3.0% |
| Gibraltar Industries, Inc. | 2.9% |
| PRA Group, Inc. | 2.9% |
Dividend Select
| Microsoft Corporation | 6.3% |
| Target Corporation | 6.1% |
| JPMorgan Chase & Co. | 4.9 |
| Eaton Corporation Plc | 3.8% |
| Comcast Corporation | 3.7% |
Mid Cap
| NVIDIA Corporation | 5.2% |
| Cintas Corporation | 4.4% |
| Ciena Corporation | 3.8% |
| Helen of Troy Limited | 3.5% |
| CDW Corporation | 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.
