Weekly Investor – Jan. 03, 2011
Happy New Year!
Market Summary:
While the major U.S. equity averages held steady during the final trading week of 2010, the full year was quite eventful for the market. Equities delivered solid gains of more than 10% during 2010 despite negative headwinds including the European debt crisis, the BP oil spill and continued sluggish conditions for both U.S. employment housing. Consensus views point to continued momentum for the U.S. equity markets in 2011, with positive sentiment supported by factors such as the potential for companies to reinvest cash stockpiles in projects and M&A activity, an increase in IPO activity and a slowly but steadily improving U.S. employment picture that should translate into increasing consumer spending. Coupled with reasonable equity valuations, we agree that such conditions should support another year of solid equity performance.
Over the past week, top-performing sectors in the S&P 500® Index included Energy (+1.0%) and Telecommunications (+0.7%), while bottom-performing sectors included Consumer Discretionary (-0.6%) and Health Care (-0.6%). In the fixed-income market, the 10-year Treasury ended the week with a yield of 3.3%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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Favorable Odds
Ultra Petroleum Corporation (UPL) engages in the development, production, operation and acquisition of oil and gas properties. UPL has reserves located in the Pinedale Basin (Wyoming) and the Marcellus Shale Basin (Pennsylvania).
Despite the current scenario of relatively low natural gas prices, UPL retains a profitable production growth profile due to its high-quality, low cost Pinedale acreage. Expanding upon its best-in-breed resource base, UPL recently purchased additional acreage in the Marcellus Shale Basin. The acquisition will enable UPL to reinvest its impressive cash flow and accelerate production growth. These factors combined with industry leading financial returns and a favorable valuation near the market average lead Argent to conclude UPL represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Starwood Hotels | 4.1% |
| Google Inc. | 4.1% |
| Danaher Corp. | 3.9% |
| Carnival Corp. | 3.8% |
| Qualcomm Inc. | 3.6% |
| Energizer Holdings | 3.5% |
| Biogen Idec Inc. | 3.3% |
| FactSet Research | 3.3% |
| Cisco Systems Inc. | 3.3% |
| EMC Corp. | 3.2% |
U.S. Equity Indices
| Index | 12/31/10 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 11,577.5 | 0.0% | 11.0% |
| NASDAQ | 2,652.9 | -0.5% | 16.9% |
| S&P 500 | 1,257.6 | 0.1% | 12.8% |
| Russell 1000 G | 574.1 | -0.1% | 14.9% |
U.S. Credit Rates
| Index | 12/31/10 | 12/24/10 | 12/31/09 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 2.0% | 2.1% | 2.6% |
| 10 Year T-Note | 3.3% | 3.4% | 3.8% |
| 30 Year T-Bond | 4.3% | 4.5% | 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.
