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News & Our Thinking

Weekly Investor

Weekly Investor – Oct. 18, 2010

20 October 2010

Mostly Good News

Market Summary:  

The major U.S. equity averages ended the week in the green.  Good quarterly results and better-than-expected outlooks from Google (GOOG) and Intel (INTC) supported a rally of the technology-heavy NASDAQ Composite.    In addition, FOMC Minutes released on Tuesday and statements by Fed Chairman Bernanke on Friday pointed to the increasing likelihood of “QE2”.  However, the Market’s optimism was somewhat dampened by the expanding mortgage foreclosure investigations.  As a result, bank stocks fell sharply during the week despite reported improvement of business fundamentals by selected large banks in quarterly earnings results.  Investors’ attention will continue to be focused on deciphering earnings while keeping a close eye on developments on the mortgage investigation front.

Over the past week, top-performing sectors in the S&P 500® Index included Technology (+3.9%) and Consumer Staples (+1.4%), while bottom-performing sectors included Financials (-2.4%) and Industrials (-0.1%).  In the fixed-income market the 10-year Treasury lost ground, 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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Execute, Execute, Execute

Energizer Holdings, Inc. (ENR) manufactures batteries, flashlights and shaving products. While the company is based in St. Louis, Missouri, its products are sold in more than 165 countries. ENR’s manufacturing and packaging operations are conducted in 23 facilities spread across five continents. With the acquisition of Playtex Products, ENR added the Playtex, Wet Ones and Banana Boat brands to its previously held Eveready and Energizer brands.

An increasingly competitive promotional environment since the company’s spin-off from Ralston Purina in April of 2000 has not hampered current management’s ability to increase profit margins to historic highs. This has been accomplished in part by reducing operating costs and closing unproductive facilities. Almost on cue, as returns improved to levels exceeding ENR’s cost of capital, management shifted the focus back to growth and bought Playtex in 2007. Today, ENR has solid competitive positions in both batteries and razors. Given the combination of ENR’s business strategy and its management’s proven track record of effectively running manufacturing businesses, we believe shares should continue to offer attractive returns.

 

 

Top 10 Equity Holdings


Google Inc. 4.4%
Newell Rubbermaid 4.1%
Cisco Systems Inc. 4.0%
Starwood Hotels 4.0%
Energizer Holdings 3.8%
Danaher Corp. 3.7%
Carnival Corp. 3.5%
MasterCard Inc. 3.3%
FactSet Research Systems 3.3%
EMC Corp. 3.2%

U.S. Equity Indices


Index 10/15/10 Week % Chg YTD % Chg
DJIA 11,062.8 0.5% 6.1%
NASDAQ 2,468.8 2.8% 8.8%
S&P 500 1,176.2 1.0% 5.5%
Russell 1000 G 535.9 1.9% 7.1%

U.S. Credit Rates


Index 10/15/10 10/08/10 12/31/09
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.2% 1.1% 2.6%
10 Year T-Note 2.6% 2.4% 3.8%
30 Year T-Bond 4.0% 3.8% 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.