Weekly Investor – September 21, 2020
Pullback Continues
The market fell for a third consecutive week as large companies in the Information Technology sector declined. Investors have started to rotate into more economically sensitive, cyclical areas of the market over the last few weeks at the expense of the technology leaders. Giving investors some confidence in cyclical stocks is recent economic data that continues to show improvement, albeit at a slower pace. Industrial production increased by 0.4% in August versus 3.0% in July. Retail sales rose 0.6% for the month, against a 1.2% increase in July.
In stock news, shares of Snowflake Inc. surged over 100% above its initial public offering (IPO) price and closed the week with a market capitalization close to $66 billion. The cloud data warehouse vendor made history as the biggest IPO for a software company. Despite a strong beat and good guidance, shares of Adobe Inc. fell as investors took profits. Shares of FedEx Corporation climbed following a strong quarter as ecommerce increased the company’s sales by 36.0%. In addition, profits improved due to increased volume, lower fuel costs and package surcharges.
The S&P 500® Index was down 0.6% for the week. Its top-performing sectors were Energy (2.9%) and Industrials (1.5%), while the bottom-performing sectors were Communication Services (-2.3%) and Consumer Discretionary (-2.3%). In the fixed-income market, the 10-year Treasury yield was even, ending at 0.7%.
We continue to seek companies that reflect our Change-BasedSM investment approach.
Change Based Investment
Incyte Corporation is a biopharmaceutical firm specializing in oncology drugs. Incyte went public in 1993 and is based in Delaware.
Incyte has an established base business anchored by its lead cancer drug, Jakafi, which entered blockbuster status by surpassing $1 billion in sales. Jakafi has the long-term potential of reaching $2.5-$3.0 billion in sales, offering substantial growth for the company. Additionally, Incyte has a pipeline of drugs that provide the possibility of fueling growth for the company beyond the next decade. Incyte has been strengthening this pipeline through both internal and external developments such as the company’s deal with MorphoSys. This deal added another cancer drug into the pipeline, offering blockbuster potential. Incyte shareholders could benefit as more mature, and larger pharmaceutical companies look to acquire smaller companies like Incyte to accelerate their growth. This wave of consolidation is a positive change for the industry. With the current and future sales of Jakafi and a pipeline of late-stage drug candidates, Incyte offers a compelling opportunity for our clients.
Top 5 Equity Holdings
Large Cap Growth
| Apple, Inc. | 6.5% |
| Alphabet, Inc. (Google) | 6.1% |
| Mastercard Incorporated | 5.9% |
| Target Corporation | 5.7% |
| Danaher Corporation | 5.5% |
Small Cap Core
| Medpace Holdings, Inc. | 3.6% |
| Fortinet, Inc. | 3.1% |
| Addus Homecare Corp. | 2.9% |
| OneMain Holdings, Inc. | 2.9% |
| Gibraltar Industries, Inc. | 2.8% |
Dividend Select
| Target Corporation | 6.5% |
| Microsoft Corporation | 6.0% |
| JPMorgan Chase & Co. | 4.7 |
| Eaton Corporation Plc | 3.8% |
| Comcast Corporation | 3.7% |
Mid Cap
| NVIDIA Corporation | 5.5% |
| Cintas Corporation | 4.4% |
| Marvell Technology Group | 3.7% |
| CDW Corporation | 3.5% |
| NVR, Inc. | 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.
