Weekly Investor – Dec. 13, 2010
Trading Bonds for Stocks
Market Summary:
The major U.S. equity averages posted another week of gains. Building on the positive momentum from last week, investors decidedly began their departure from the Treasury bond market. A sharp decline in the 10-year Treasury bond resulted in a 40 basis-points increase in yield during the week. A number of good news headlines supported the positive sentiment during the week: the government plans to sell off its remaining stake in Citigroup (C); AIG (AIG) will pay back the $20 billion it owed to the Federal Reserve; and General Electric significantly increased its dividend. In addition, the equity markets applauded Capital Hill’s efforts to inch closer to a compromise that extends the Bush-era tax cuts along alongside a 13-month extension of federal unemployment benefits.
Over the past week, top-performing sectors in the S&P 500® Index included Financials (+3.8%) and Telecommunications (+2.0%), while bottom-performing sectors included Utilities (-0.7%) and Energy (+0.4%). In the fixed-income market, the 10-year Treasury declined, ending the week with yield at 3.3%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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Well Positioned for Growth
Trimble Navigation Ltd. (TRMB) develops, manufactures and markets advanced global positioning system (“GPS”) products and solutions for the engineering and construction, agriculture, transportation and communications industries.
TRMB’s end markets struggled over the past two years as funding for construction projects tightened and commodity prices fell. Despite the difficult environment, TRMB’s continued investment in new technologies and the completion of several small, strategic acquisitions enabled the company to gain market share. As customers experienced tangible evidence that TRMB’s products enabled them to operate more efficiently, customers increased orders in the second half of 2009 and TRMB began to post accelerating revenue growth. With a best-in-breed financial profile and the potential for earnings acceleration as the economy improves, we believe TRMB offers favorable odds to our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Starwood Hotels | 4.1% |
| Google Inc. | 4.1% |
| Danaher Corp. | 3.8% |
| Carnival Corp. | 3.7% |
| Qualcomm Inc. | 3.6% |
| MasterCard Inc. | 3.4% |
| FactSet Research | 3.4% |
| Energizer Holdings | 3.4% |
| Biogen Idec Inc. | 3.3% |
| Maxim Integrated | 3.3% |
U.S. Equity Indices
| Index | 12/10/10 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 11,410.3 | 0.3% | 9.4% |
| NASDAQ | 2,637.5 | 1.8% | 16.2% |
| S&P 500 | 1,240.4 | 1.3% | 11.2% |
| Russell 1000 G | 569.4 | 0.8% | 13.8% |
U.S. Credit Rates
| Index | 12/10/10 | 12/03/10 | 12/31/09 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 2.0% | 1.5% | 2.6% |
| 10 Year T-Note | 3.3% | 2.9% | 3.8% |
| 30 Year T-Bond | 4.4% | 4.3% | 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.
