Weekly Investor – May 09, 2011
The Market’s Balancing Act
Market Summary:
The major U.S. equity averages ended the week lower as softer-than-expected economic data weighed heavily on investors. This data included a disappointing non-mfg PMI reading along with a jump in unemployment claims. Helping add balance to the economic debate was a much better chain-store sales number along with continuing improvement in banks willingness to lend. Another major topic for the week was the continuing correction in the commodities markets. This slide saw oil close the week below the $100 a barrel mark, helping dampen the inflation argument. With the month of May upon us, investors will see if the old axiom “When in May, go Away!” holds true.
Over the past week, top-performing sectors in the S&P 500® Index included Health Care (+0.6%) and Utilities (+0.3%), while bottom-performing sectors included Energy (-6.9%) and Basic Materials (-3.8%). In the fixed-income market, the 10-year Treasury gained ground this week with the yield ending at 3.2%.
We continue to seek those companies possessing identifiablecatalysts, and focusing on those stocks with favorable odds.
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Strategy for Success
Founded in 1983, Maxim Integrated Products, Inc. (MXIM) designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits. MXIM has more than 6,000 distinct products integrated into a wide variety of microprocessor-based electronic devices. The company’s products are classified in the following key areas: industrials, communications, consumer products, and computing.
MXIM’s business strategy underwent significant review and restructuring following an investigation in the beginning of 2007 concerning how the company granted and accounted for stock options. The new CEO and CFO have since brought additional discipline in measuring returns on Research and Development spending. MXIM is also in the process of closing its facilities in Dallas as part of its plan to improve returns on assets. We believe the current economic downturn is masking many long-term benefits of MXIM’s restructuring and that investors are taking a show-me-the-results approach towards the company. We also believe the odds are favorable that MXIM’s earnings will surprise on the upside as product sales return to more normalized levels. Meanwhile, with shares trading at a discount, MXIM is poised to outperform the market and its peers in the long-term.
Top 10 Equity Holdings
| . | |
|---|---|
| Danaher Corp. | 4.1% |
| Qualcomm Inc. | 3.8% |
| EMC Corp. | 3.5% |
| FactSet Research | 3.5% |
| Jabil Circuit Inc. | 3.4% |
| UniteHealth Inc. | 3.4% |
| Biogen Idec Inc. | 3.4% |
| Maxim Inc. | 3.4% |
| MasterCard Inc. | 3.4% |
| Google Inc. | 3.4% |
U.S. Equity Indices
| Index | 05/06/11 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,638.7 | -1.3% | 9.2% |
| NASDAQ | 2,827.6 | -1.6% | 6.6% |
| S&P 500 | 1,340.2 | -1.7% | 6.6% |
| Russell 1000 G | 616.1 | -1.8% | 7.2% |
U.S. Credit Rates
| Index | 05/06/11 | 04/29/11 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.0% | 0.0% | 0.1% |
| 5 Year T-Note | 1.9% | 2.0% | 2.0% |
| 10 Year T-Note | 3.2% | 3.3% | 3.3% |
| 30 Year T-Bond | 4.3% | 4.4% | 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.
