Weekly Investor – Nov. 08, 2010
The major U.S. equity averages posted strong gains this past week, climbing further into positive territory for the year. Catalysts for the move included the unveiling of the Fed’s plan for “QE2,” a changing of the guard following general election results and strong economic readings. Regarding QE2, $600 billion will be allocated to purchase treasuries to help provide fuel for economic activity and support asset prices. While the impact of this has been an area of heated debate, the initial reaction by the equity market provided a smile for investors. Inflation and its potential impact will be key areas of focus for investors going forward. In addition, the political winds of change came in the form of Republicans taking control of the House, leaving many predicting political gridlock. On the economic front, an upside surprise in jobs gained in October added to positive investor sentiment.
Over the past week, top-performing sectors in the S&P 500® Index included Financials (+6.9%) and Energy (+5.0%), while bottom-performing sectors included Health Care (+0.9%) and Utilities (+1.0%). In the fixed-income market the 10-year Treasury gained ground, ending the week at 2.5%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
New Products Delivering
Google, Inc. (GOOG) has achieved worldwide name recognition with its famed Google search engine. Beyond this well-known service, the technology company also provides targeted advertising solutions (Google AdSense), a checkout service for merchants (Google Checkout), collaboration tools for organizations (Google Apps), and a host of additional online utilities such as Google Maps, Google Video, Google Docs, Google Toolbar, Google Desktop, Google Reader, and of course Gmail. The Mountain View, California based company was founded in 1998, and prides itself on maintaining a corporate culture that encourages creativity and community.
We believe the current trend of allocating additional advertising dollars to internet search ads will continue, and that GOOG is well-positioned to benefit from this trend. With its sophisticated search engine, GOOG is able to proficiently match buyers to providers. Providers recognize the attractiveness of this service and are willing to pay for it accordingly. Recently, near-term economic conditions have placed pressure on GOOG’s stock, which has opened the door for long-term investors such as our clients. We believe the company will outperform its peers over the next three to five years.
Top 10 Equity Holdings
|Cisco Systems Inc.||4.1%|
|Biogen Idec Inc.||3.2%|
U.S. Equity Indices
|Index||11/05/10||Week % Chg||YTD % Chg|
|Russell 1000 G||559.3||3.6%||11.8%|
U.S. Credit Rates
|3 Month T-Bill||0.1%||0.1%||0.1%|
|5 Year T-Note||1.1%||1.2%||2.6%|
|10 Year T-Note||2.5%||2.6%||3.8%|
|30 Year T-Bond||4.1%||4.0%||4.6%|
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.