Weekly Investor – Jan. 18, 2011
An Encouraging Start
Market Summary:
The major U.S. equity averages extended their gaining streak, ending in the plus column for the 7th consecutive week. In what typically is a good sign for investors, financial stocks have stormed out of the gate to lead all sectors higher to start the year. This positive momentum has been fueled by a series of events, including the potential for banks to once again pay dividends, along with data showing solid improvement in loan activity. Optimism is certainly rebounding as evident by investor and fund manager surveys. With earnings season set to kick into high gear, it will not be long before we find out if that optimism is warranted.
Over the past week, top-performing sectors in the S&P 500® Index included Energy (+3.3%) and Financials (+3.2%), while bottom-performing sectors included Telecommunications (-1.6%) and Health Care (+0.2%). In the fixed-income market, the 10-year Treasury remained little changed during the week with the yield ending at 3.4%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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Executing on a Turnaround
Founded in 1901, Deerfield, Illinois based Walgreen Co. (WAG) operates drugstores across the United States. While WAG’s stores do sell both prescription and non-prescription drugs, many additional items such as beauty products, convenience foods, household supplies and greeting cards are also available. In addition to the company’s roughly 7,000 locations, WAG’s products and services are available by telephone, mail and online. A few years ago, WAG expanded its services to include quick-serve clinician locations (Take Care Clinics) in select drugstores.
WAG has been executing on a strategy to combat its underperformance, which resulted in part from conditions relating to its saturated store base and the overall declining economy. The company has redirected its focus from developing new stores to improving the already existing store base, which in our opinion is the appropriate strategy to pursue. Based on this change in strategy, encouraging feedback from our Main Street contacts and the stock’s attractive valuation level, WAG offers favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google Inc. | 4.2% |
| Starwood Hotels | 4.1% |
| Carnival Corp. | 3.8% |
| Danaher Corp. | 3.8% |
| Qualcomm Inc. | 3.8% |
| EMC Corp. | 3.4% |
| Cisco Systems Inc. | 3.4% |
| Energizer Holdings | 3.3% |
| Maxim Integrated | 3.3% |
| FactSet Research | 3.3% |
U.S. Equity Indices
| Index | 01/14/11 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 11,787.4 | 1.0% | 1.8% |
| NASDAQ | 2,755.3 | 1.9% | 3.9% |
| S&P 500 | 1,293.2 | 1.7% | 2.8% |
| Russell 1000 G | 591.7 | 1.9% | 3.0% |
U.S. Credit Rates
| Index | 01/14/11 | 01/07/11 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.2% | 0.2% | 0.1% |
| 5 Year T-Note | 2.0% | 2.1% | 2.0% |
| 10 Year T-Note | 3.4% | 3.4% | 3.3% |
| 30 Year T-Bond | 4.6% | 4.5% | 4.3% |
| 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.
