Weekly Investor – August 01, 2011
Deficit Dance
Market Summary:
The major U.S. equity averages all posted declines as concerns regarding the U.S. Congress’s inability to reach a deal on raising the debt ceiling and sluggish second quarter GDP growth continue. Concerns included the potential implications of a U.S. sovereign debt downgrade by the ratings agencies even if debt ceiling and deficit deals are reached. In economic news, second quarter GDP rose 1.3% (compared to consensus expectations of 1.7%) on the heels of a downwardly revised modest 0.4% increase in the first quarter. At the same time, jobless claims declined, offering investors some positive economic news. On the earnings front, roughly one third of S&P 500® companies reported this week and results for the quarter were positive on balance as 58% of companies beat earnings expectations and 83% beat sales expectations.
Over the past week, top-performing sectors in the S&P 500® Index included Utilities (-2.1%) and Consumer Staples (-2.9%), while bottom-performing sectors included Industrials (-6.0%) and Basic Materials (-4.9%). In the fixed-income market, the 10-year Treasury gained ground with the yield ending the week at 2.8%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
———————————————————————————————————————————————
Focusing on Execution to Increase Sales
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 ourMain Streetcontacts and the stock’s attractive valuation level, WAG offers favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google Inc. | 4.0% |
| MasterCard Inc. | 4.0% |
| Danaher Inc. | 4.0% |
| Qualcomm Inc. | 3.9% |
| Biogen Idec Inc. | 3.8% |
| Energizer Holdings | 3.7% |
| Gilead Sciences Inc. | 3.7% |
| EMC Corp. | 3.6% |
| Allergan Inc. | 3.3% |
| Jabil Circuit Inc. | 3.2% |
U.S. Equity Indices
| Index | 07/29/11 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,143.2 | -4.2% | 4.9% |
| NASDAQ | 2,756.4 | -3.6% | 3.9% |
| S&P 500 | 1,292.3 | -3.9% | 2.8% |
| Russell 1000 G | 603.1 | -4.0% | 4.9% |
U.S. Credit Rates
| Index | 07/22/11 | 07/15/11 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.4% | 1.5% | 2.0% |
| 10 Year T-Note | 2.8% | 3.0% | 3.3% |
| 30 Year T-Bond | 4.1% | 4.3% | 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.
