Weekly Investor – Aug. 02, 2010
Mixed Messages
Market Summary:
The major U.S. equity averages ended the week in mixed territory, with only the DOW posting a gain. The fact that the equity markets remain near the levels at the beginning of 2010 seems misleading considering the volatile price swings investors have experienced throughout 2010. Volatility increases with uncertainty and current market action is no different. As conflicting economic reports frequently emerge, ammunition is abundant for both bull and bear camps. The ongoing debate of an economic soft patch or double dip recession remains front and center for investors. Until clarity is gained on this topic, one can expect volatility to remain. Thus far, 2nd quarter earnings season has been coming in on the strong side for Corporate America. If the trend is our friend, this is an encouraging sign for investors. Stay tuned.
Over the past week, top-performing sectors in the S&P 500® Index included Telecomm (+1.7%) and Financials (+1.0%), while bottom-performing sectors included Technology (-1.6%) 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 2.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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Change of Strategy
Founded in 1901, Deerfield, Illinois based Walgreen Co. (WAG) operates drugstores across the United States. WAG’s stores sell both prescription and non-prescription drugs, as well as many additional items such as beauty products, convenience foods, household supplies and greeting cards. In addition to the company’s roughly 7,000 locations, WAG’s products and services are available by telephone, mail and online. A few years ago, WAG expanded its services to include quick-serve clinician locations (Take Care Clinics) in select drugstores.
WAG announced a new strategy to combat its underperformance, which resulted in part from conditions relating to its saturated store base and the overall declining economy. The company has redirected its focus from developing new stores to improving the already existing store base, which in our opinion is the appropriate strategy to pursue. Based on this change in strategy, encouraging feedback from our Main Street contacts and the stock’s attractive valuation level, WAG offers favorable odds for our clients.
Top 10 Equity Holdings
| Cisco Systems Inc. | 4.5% |
| Google Inc. | 4.0% |
| Newell Rubbermaid Inc. | 3.9% |
| Starwood Hotels | 3.7% |
| Danaher Corp. | 3.5% |
| Energizer Holdings | 3.4% |
| Carnival Corp. | 3.4% |
| EMC Corp. | 3.4% |
| Intel Corp. | 3.3% |
| Biogen Idec Inc. | 3.3% |
U.S. Equity Indices
| Index | 07/30/10 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 10,465.9 | 0.4% | 0.4% |
| NASDAQ | 2,254.7 | -0.7% | -0.6% |
| S&P 500 | 1,101.6 | -0.1% | -1.2% |
| Russell 1000 G | 490.6 | -0.6% | -1.9% |
U.S. Credit Rates
| Index | 07/30/10 | 07/23/10 | 12/31/09 |
|---|---|---|---|
| 3 Month T-Bill | 0.2% | 0.2% | 0.1% |
| 5 Year T-Note | 1.6% | 1.7% | 2.6% |
| 10 Year T-Note | 2.9% | 3.0% | 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.
