Weekly Investor – Sept. 07, 2010
Strong Finish
Market Summary:
Despite a difficult start to the week, the major U.S. equity averages all registered sharp gains last week. The market reacted to better-than-expected jobs data, as August non-farm jobs lost of 54,000 was less than the 120,000 jobs lost forecasted by economists, and private sector job gains in August continued a positive trend throughout 2010. In addition, better than expected readings of manufacturing activity in the U.S. and China offered support. Investors interpreted this “less negative” data as lowering the chance of a double-dip recession and shifted investor sentiment toward equities.
Over the past week, top-performing sectors in the S&P 500® Index included Financials (+5.7%) and Consumer Discretionary (+5.0%), while bottom-performing sectors included Utilities (+1.6%) and Telecommunications (+2.0%). In the fixed-income market the 10-year Treasury remained at the same level during the week with yield ending the week at 2.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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A Comany with Catalysts
Chico’s FAS, Inc. (CHS) is a specialty retailer of private branded, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items under the Chico’s, White House|Black Market (WH|BM) and Soma Intimates (Soma) brand names. The Chico’s brand sells clothing focusing on women age 35 and over with a moderate to high income level. The WH|BM brand sells fashion and merchandise primarily in black and white and related shades focusing on women age 25 and over with a moderate to high income level. The Soma brand sells primarily intimate apparel, sleepwear and active wear.
Chico’s FAS has many of the traits Argent finds attractive. First, the company has a slate of new management. Second, new management is slowing growth in its core Chico’s stores to improve operational performance. Third, CHS is implementing growth initiatives, such as seeking to increase catalog sales as a percentage of sales, as well as adding stores to its White House|Black Market concept. CHS has shown success in its turnaround, with comparable-store sales better than its peers. Finally, CHS has a strong balance sheet, with very little debt. Given these positive levers, we believe CHS represents an appropriate investment for our clients.
Top 10 Equity Holdings
| Cisco Systems Inc. | 4.0% |
| Starwood Hotels | 4.0% |
| Newell Rubbermaid | 4.0% |
| Google Inc. | 3.9% |
| Danaher Corp. | 3.8% |
| Energizer Holdings | 3.7% |
| Carnival Corp. | 3.4% |
| EMC Corp. | 3.3% |
| Biogen Idec Inc. | 3.3% |
| FactSet Research Systems | 3.3% |
U.S. Equity Indices
| Index | 09/03/10 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 10,447.9 | 2.9% | 0.2% |
| NASDAQ | 2,233.8 | 3.7% | -1.6% |
| S&P 500 | 1,104.5 | 3.8% | -0.9% |
| Russell 1000 G | 492.1 | 3.7% | -1.6% |
U.S. Credit Rates
| Index | 08/27/10 | 08/2710 | 12/31/09 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.4% | 1.4% | 2.6% |
| 10 Year T-Note | 2.6% | 2.6% | 3.8% |
| 30 Year T-Bond | 3.7% | 3.6% | 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.
