Weekly Investor – August 15, 2011
U.S. Treasury Bonds Rise after Downgrade
Following a week of extreme volatility, trading calmed down Friday. The U.S.major equity averages ended the week with two positive sessions which helped to minimize the weekly decline following Monday’s and Wednesday’s extensions lower. The market’s decline to begin the week was domestic-focused after Standard & Poor’s became the first agency to downgrade the sovereign credit rating of theUnited States. The downgrade from AAA to AA+, based on political risks and the country’s rising debt burden, causedU.S.equity markets to nosedive Monday. Overall, Monday’s reaction was probably more closely related to investors’ lack of faith in the leadership of our political institutions than the actual credit downgrade, which in the short run is more symbolic than directly negative. In fact, Treasury yields declined and prices rose last week. In addition, the markets continue to keep close watch onEurope, as concerns over the health of French banks was the concern of the week. On the other hand, modestly positive data points regarding jobs and consumer spending contributed to support for equities, as quarterly earnings that have continued to be positive, on balance. As earnings season is drawing to a close, the focus on the global economy should dominate the headlines over the next month or two.
The S&P 500 lost 1.7% on the week with nine of the ten sectors declining. Over the past week, top-performing sectors in the S&P 500® Index included Basic Materials (+0.2%) and Health Care (-0.7%), while bottom-performing sectors included Financials (-5.0%) and Energy (-2.2%). In the fixed-income market, the 10-year Treasury gained ground with the yield ending the week at 2.3%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
New Product Cycle Fueling Growth
Biogen Idec Inc. (BIIB) develops, manufactures and brings to market therapies for multiple sclerosis, rheumatoid arthritis and lymphoma. BIIB also has numerous products in the pipeline for treating complications such as hyponatremia. The company currently offers four products: Avonex, Rituxan, Tysabri and Fumaderm.
Upcoming catalysts that should help garner attention from investors include the expansion of its lead oncology drug, Rituxan, as well as the continued penetration of its next-generation MS drug, Tysabri. While Wall Street remains skeptical of BIIB’s ability to deliver growth into the next decade, feedback from our Main Street contacts gives us added confidence in the company’s ability to continue delivering innovative medical treatments and we believe shares in BIIB represent favorable odds for our clients.
Top 10 Equity Holdings
|Biogen Idec Inc.||3.7%|
|Gilead Sciences Inc.||3.5%|
|Hansen Natural Corp.||3.3%|
U.S. Equity Indices
|Index||08/12/11||Week % Chg||YTD % Chg|
|Russell 1000 G||553.3||-0.9%||-3.7%|
U.S. Credit Rates
|3 Month T-Bill||0.1%||0.1%||0.1%|
|5 Year T-Note||1.0%||1.3%||2.0%|
|10 Year T-Note||2.3%||2.6%||3.3%|
|30 Year T-Bond||3.7%||3.8%||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.