News & Our Thinking

Weekly Investor

Weekly Investor – December 12, 2011

25 January 2012

A Familiar Tune

Market Summary:  

The major U.S. equity averages all posted gains for what turned out to be another volatile week for equity investors.  The headlines that continued to take center stage remained action out of the Eurozone and the potential for long-term fixes to the debt issues plaguing the area.  In addition,China remained a key focus for investors as the debate raged on over a potential slow down and its impact on the rest of the world.  Domestically, the economic data continued its winning streak thanks to better than expected unemployment claims data.  As end of the year quickly approaches, the markets remain virtually unchanged as investors have been in a virtual tug of war between international uncertainty and a slowly improving U.S. outlook.  With 2012 just around the corner, attractive valuations and signs of economic improvement may bode well for better times ahead.

The S&P 500® closed up 0.9% for the week.  The top-performing sectors in the S&P 500® Index included Financials (+1.7%) and Technology (+1.3%), while bottom-performing sectors included Basic Materials (-0.1%) and Energy (+0.1%).  In the fixed-income market, the 10-year Treasury ended the week little changed at 2.0%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

A Strategy for Sustained Growth

Jabil Circuit, Inc. (JBL) provides electronic manufacturing services and solutions in the Americas, Europe and Asia.  Founded in 1966 and headquartered in St. Petersburg, Florida, JBL offers electronics and mechanical design, production, product management, and after-market services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.

In the aftermath of the financial crisis, JBL refocused its business plan to accelerate the growth of its higher margins diversified manufacturing services segment while maintaining industry growth rates on its traditional businesses.  We believe JBL’s new approach will deliver longer-term sustainable margin improvement as well as earnings growth.  Since the implementation of its new strategy, JBL has improved its operating margins to pre-crisis levels.  However, JBL’s current valuation reflects skepticism of JBL’s ability to sustain its recent success.  At Argent, we see significant upside potential in JBL with reasonable downside; thus we are getting paid to take the risk.

Top 10 Equity Holdings

MasterCard Inc. 5.0%
Biogen Idec Inc. 4.3%
Google Inc. 4.2%
Qualcomm Inc. 4.0%
Danaher Corp. 3.8%
Hansen Natural Corp. 3.7%
Jabil Circuit Inc. 3.6%
Allergan Inc. 3.5%
Gilead Sciences Inc. 3.4%
Energizer Holdings 3.4%

U.S. Equity Indices

Index 12/09/11 Week % Chg YTD % Chg
DJIA 12,184.3 1.4% 5.2%
NASDAQ 2,646.9 0.8% -0.2%
S&P 500 1,255.2 0.9% -0.2%
Russell 1000 G 585.3 0.5% 1.9%

U.S. Credit Rates

Index 12/09/11 12/02/11 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.9% 0.9% 2.0%
10 Year T-Note 2.0% 2.0% 3.3%
30 Year T-Bond 3.1% 3.0% 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.