Weekly Investor – March 21, 2011
Another Rough Week
The major U.S. equity averages all closed lower for another week. Unfolding nuclear crisis reports in Japan and continued unrest in the Middle East drove investors to make further defensive moves. The nuclear crisis in Japan also generated doubt on the future of nuclear power. As a result, equities with exposure to the nuclear power industry suffered significant losses. Near-term manufacturing disruption combined with potential short-term weakened demand of technology products in Japan weighed heavily on the technology sector. Some relief to all the bad news finally came on Friday with G7 Finance Ministers and central bankers announcing plans to stem the strengthening yen. In addition, the UN reached an agreement to enforce a no-fly zone in Libya, prompting an immediate declaration of cease fire by the Libya regime.
Over the past week, top-performing sectors in the S&P 500® Index included Energy (+0.4%) and Basic Materials (-0.1%), while bottom-performing sectors included Utilities (-4.3%) and Technology (-3.6%). In the fixed-income market, the 10-year Treasury gained ground during the week with the yield ending at 3.3%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Improving Financial Returns
Hasbro Inc. (HAS) engages in the design, manufacture, and marketing of games and toys. Founded in 1923 and headquartered in Pawtucket, Rhode Island, HAS primarily provides children’s and family leisure time entertainment products under popular brand names such as Playskool, Transformers, Nerf, Milton Bradley, and Parker Brothers, among others. HAS sells its products through its own sales force and distributors primarily in the United States, Canada, Mexico, Europe, the Asia Pacific, Latin America, and South America.
In recent years, HAS has focused on increasing its financial return profile by developing a portfolio of toys and games that offers growth potential beyond traditional industry avenues. As an example of this strategy, the company has leveraged its Transformers brand into a multi-billion dollar franchise that generates profits from multiple sources including hit movies, TV shows, online gaming as well as traditional toys. In addition to its Transformers brand, HAS has a deep pipeline of upcoming movie launches including Transformers 3, Battleship, and Stretch Armstrong, to name a few. In addition to movies, the launch of the new HUB cable channel, a joint venture between HAS and Discovery Communications, is expected to increase interest in HAS products. HAS’s strong cash flows, attractive valuation, and earnings power that we believe is underestimated by Wall Street combine to represent favorable odds for our clients.
Top 10 Equity Holdings
|Biogen Idec Inc.||3.5%|
|Jabil Circuit Inc.||3.3%|
U.S. Equity Indices
|Index||03/18/11||Week % Chg||YTD % Chg|
|Russell 1000 G||581.2||-2.3%||1.1%|
U.S. Credit Rates
|3 Month T-Bill||0.1%||0.1%||0.1%|
|5 Year T-Note||1.9%||2.0%||2.0%|
|10 Year T-Note||3.3%||3.4%||3.3%|
|30 Year T-Bond||4.4%||4.6%||4.3%|
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.