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News & Our Thinking

Weekly Investor

Weekly Investor – Aug. 09, 2010

09 August 2010

Measured Progress

Market Summary:  

The major U.S. equity averages ended the week higher as second quarter earnings announcements, on balance, continued to be positive.  With approximately 90% of companies in the S&P 500® Index having reported, more than 75% have beaten Wall Street earnings estimates for the second quarter.   However, the week was not without headwinds.  Friday’s negative unemployment reports reminded investors of the long-term nature of the labor market healing process, and equity markets gave back part of the week’s gains.  This week, equity investors will digest another week of earnings reports and all eyes will be on the Fed which meets Tuesday to consider, among other things, whether the perceived risks of deflation are legitimate.

Over the past week, top-performing sectors in the S&P 500® Index included Healthcare (+4.0%) and Energy (+3.2%), while bottom-performing sectors included Financials (+0.5%) and Consumer Staples (+0.6%).  In the fixed-income market the 10-year Treasury gained ground during the week with yield ending the week at 2.8%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

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Favorable Odds

 

Allergan, Inc. (AGN) was founded in 1948 and is presently headquartered in Irvine, California. AGN discovers, develops and commercializes medical devices, pharmaceuticals and additional products for numerous specialty medical markets such as neurology, medical aesthetics, dermatology and urology. The company’s pharmaceutical segment is responsible for the ever trendy Botox. Popular medical devices include the Lap-Band System as well as additional aesthetic products for augmentations and enhancements.  The company has collaborative research agreements with ExonHit Therapeutics S.A. and Syntaxin.

Due to pressures from a slowdown in AGN’s key franchise, Botox, the valuation of the stock has remained quite attractive. Coupled with positive pipeline data regarding Botox as a potential treatment for migraine headaches, we have added confidence that AGN can maintain its better than average growth profile.  In addition, encouraging feedback from our Main Street contacts concerning the company’s pipeline also leads us to believe that shares of AGN represent favorable odds for long-term investors.

 

 

Top 10 Equity Holdings


Cisco Systems Inc. 4.5%
Google Inc. 4.0%
Newell Rubbermaid Inc. 4.0%
Starwood Hotels 3.9%
Danaher Corp. 3.7%
Energizer Holdings 3.5%
Carnival Corp. 3.5%
EMC Corp. 3.3%
Biogen Indec Inc. 3.3%
Intel Corp. 3.2%

U.S. Equity Indices


Index 08/06/10 Week % Chg YTD % Chg
DJIA 10,653.6 1.8% 2.2%
NASDAQ 2,288.5 1.5% 0.9%
S&P 500 1,121.6 1.8% 0.6%
Russell 1000 G 493.9 0.2% -1.3%

U.S. Credit Rates


Index 08/06/10 07/30/10 12/31/09
3 Month T-Bill 0.2% 0.2% 0.1%
5 Year T-Note 1.5% 1.6% 2.6%
10 Year T-Note 2.8% 2.9% 3.8%
30 Year T-Bond 4.0% 4.0% 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.