Weekly Investor – May 02, 2011
Strong Earnings Saved the Day
Market Summary:
The major U.S. equity averages ended the week with gains across the board. Approximately 300 S&P 500 companies reported during the week and the majority posted better-than-expected results. The higher earnings growth supported the upward movement in the market. However, the positive earnings news was somewhat offset by higher commodity prices and a lower dollar. On the economic front, the FMOC left the overnight bank borrowing rate unchanged at 0.00% to 0.25%. While the FMOC believes US GDP growth for 2011 will be slightly slower than previously forecasted, it also predicts a lower unemployment rate, projected to decrease to between 8.4% and 8.7% by year end.
Over the past week, top-performing sectors in the S&P 500® Index included Health Care (+2.9%) and Industrials (+2.8%), while bottom-performing sectors included Basic Materials (1.0%) and Technology (1.5%). In the fixed-income market, the 10-year Treasury gained ground this week with the yield ending at 3.3%.
We continue to seek those companies possessing identifiablecatalysts, and focusing on those stocks with favorable odds.
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Well Positioned for Growth
MasterCard, Inc. (MA), founded in 1966, operates with its subsidiaries to provide transaction processing and additional services for its credit, deposit, and ATM programs, which reach over 24,000 financial institutions worldwide. MA facilitates the authorization, clearing, and settlement of transactions, as well as markets and develops other payment-related services. MA’s brands include MasterCard, Maestro and Cirrus.
The payment transition from cash to checks to plastic is well underway in the U.S., but is in its infancy in areas abroad. We expect MA to be a prime beneficiary of this secular change, as the company enjoys high barriers to entry, basically dividing the market with Visa, Inc. (V). The positive competitive landscape will, in our belief, protect MA’s profits in the years to come, as the company increases its saturation in developing economies. Like many companies, MA has been impacted by the slowing economy; however, it has at its disposal cost cutting options to mitigate the cyclical pressures that may weigh on its earnings. Given the company’s bright long-term growth prospects and near-term ability to protect profits, we believe MA represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Biogen Idec Inc. | 4.5% |
| Danaher Corp. | 4.2% |
| Qualcomm Inc. | 3.8% |
| EMC Corp. | 3.7% |
| 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 | 04/29/11 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,810.5 | 2.4% | 10.7% |
| NASDAQ | 2,873.5 | 1.9% | 8.3% |
| S&P 500 | 1,363.6 | 2.0% | 6.4% |
| Russell 1000 G | 627.1 | 1.6% | 9.1% |
U.S. Credit Rates
| Index | 04/29/11 | 04/22/11 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.0% | 0.1% | 0.1% |
| 5 Year T-Note | 2.0% | 2.1% | 2.0% |
| 10 Year T-Note | 3.3% | 3.4% | 3.3% |
| 30 Year T-Bond | 4.4% | 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.
