Weekly Investor – April 25, 2011
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Market Summary:
The major U.S. equity averages ended the holiday shortened week higher across the board. Investors looked past an S&P downgrade for the outlook of U.S. debt and instead focused on the wave of stronger-than-expected earnings being reported for the first quarter. Of the S&P 500 companies that have reported earnings, nearly 75% have reported numbers above expectations. Investors continue to struggle with mixed signals as the improvement in the economy is balanced by oil climbing above $100 a barrel, gasoline prices hovering around $4 per gallon, surging food prices and continued unrest in the Middle East. While equity averages hover near multi-year highs and questions grow daily, investors can expect volatility to remain until answers become clear.
Over the past week, top-performing sectors in the S&P 500® Index included Technology (+3.0%) and Basic Materials (+2.8%), while bottom-performing sectors included Telecomm (-0.7%) and Financials (-0.2%). In the fixed-income market, the 10-year Treasury finished the week flat with the yield ending at 3.4%.
We continue to seek those companies possessing identifiablecatalysts, and focusing on those stocks with favorable odds.
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Turn-Around in Progress
Legg Mason Inc. (LM) is comprised of a diversified group of global asset management firms (known as “affiliates”) who are recognized for their proven investment expertise and long-term performance with investment approaches that have been developed over decades. The distinctive Legg Mason “multi-affiliate” business model provides Equity, Fixed-Income, Liquidity and Alternative Investment solutions through mutual funds, college savings plans, variable annuities and separately managed accounts.
Over the past two years, LM endured considerable tumult. The Company underwent a transition in leadership, had problems with its fixed-income investments as credit markets froze and posted relatively poor performance by many of its affiliates. Recently, LM has strengthened its balance sheet and realized better returns from many of its investment managers. Coupled with the potential for growth in the asset management industry as the economy strengthens, we believe LM’s earnings will be propelled higher and provide the basis for a favorable investment for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Biogen Idec Inc. | 4.7% |
| Danaher Corp. | 4.1% |
| Qualcomm Inc. | 3.9% |
| EMC Corp. | 3.8% |
| FactSet Research | 3.5% |
| Google Inc. | 3.4% |
| MasterCard Inc. | 3.4% |
| UnitedHealth Inc. | 3.3% |
| Jabil Circuit | 3.3% |
| Oracle Corp. | 3.3% |
U.S. Equity Indices
| Index | 04/22/11 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,506.0 | 1.3% | 8.0% |
| NASDAQ | 2,820.2 | 2.0% | 6.3% |
| S&P 500 | 1,337.4 | 1.3% | 6.3% |
| Russell 1000 G | 617.4 | 2.1% | 7.4% |
U.S. Credit Rates
| Index | 04/22/11 | 04/15/11 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 2.1% | 2.1% | 2.0% |
| 10 Year T-Note | 3.4% | 3.4% | 3.3% |
| 30 Year T-Bond | 4.5% | 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.
