Weekly Investor – June 28, 2010
An Eventful Week
Market Summary:
The major averages posted significant pull-backs last week. Weak housing data during the week weighed on the Market as both existing and new home sales for May came in significantly weaker than expected, and the pace of mortgage applications slowed. The Fed’s decision to leave the overnight rate at the current level eased concerns somewhat over the potential to stall economic recovery. A tentative agreement on financial reform helped remove some uncertainty in the Market, as the S&P 500 closed in positive territory on Friday after four days of negative trading.
Over the past week, top-performing sectors in the S&P 500® Index included Financials (-1.4%) and Health Care (-2.2%), while bottom-performing sectors included Energy (-5.9%) and Technology (-4.5%). In the fixed-income market the 10-year Treasury gained ground with yield ending the week at 3.1%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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The Right Strategy
State Street Corp. (STT) is one of the world’s leading providers of financial services to institutional investors such as mutual funds, pension plans and corporations. Services provided by STT include research, investment management, trading services and investment servicing.
In 2008, as the financial crisis unfolded, the operating environment became extremely challenging for STT. In addition to a steep decline in its assets under custody, STT faced market-driven liquidity constraints and mounting legal issues focused on its off-balance sheet assets. Actions taken by STT during 2009, as well as stabilization in markets, have largely addressed those issues. We believe STT’s valuation does not fully reflect the earnings power of the company in today’s more normalized market conditions. Furthermore, we believe STT has the potential to achieve higher than average market growth by continued expansion in markets outside of the United States. Because of these factors, we believe STT represents favorable odds for our clients over the next 3 to 5 years.
Top 10 Equity Holdings
| Cisco Systems Inc. | 4.4% |
| Newell Rubbermaid Inc. | 4.0% |
| Google Inc. | 4.0% |
| Danaher Corp. | 3.9% |
| Starwood Hotels | 3.7% |
| MasterCard Inc. | 3.5% |
| EMC Corp. | 3.3% |
| Carnival Corp. | 3.3% |
| Intel Corp. | 3.1% |
| Allergan Inc. | 3.0% |
U.S. Equity Indices
| Index | 06/25/10 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 10,143.8 | -2.9% | -2.7% |
| NASDAQ | 2,223.5 | -3.7% | -2.0% |
| S&P 500 | 1,076.8 | -3.7% | -3.4% |
| Russell 1000 G | 479.8 | -3.7% | -4.1% |
U.S. Credit Rates
| Index | 06/25/10 | 06/18/10 | 12/31/09 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.9% | 2.1% | 2.6% |
| 10 Year T-Note | 3.1% | 3.3% | 3.8% |
| 30 Year T-Bond | 4.1% | 4.2% | 4.6% |
| Prime Rate | 3.3% | 3.3% | 3.3% |
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.
