News & Our Thinking

Weekly Investor

Weekly Investor – November 07, 2011

25 January 2012

More Tricks Than Treats for Investors This Week

Market Summary:  

The major U.S. equity indices all moved lower this past week.  It seems investors chose to focus on new plot twists to the European sovereign debt crisis rather than the good economic news and corporate earnings in the U.S. Greece drove trade for virtually the entire week, initially spooking investors with plans to pursue a referendum on the Eurozone bailout, effectively threatening to undermine the plan.  Greece eventually backed away from the referendum idea, which helped to calm the markets. Back in the U.S., both economic and corporate earnings news were good. The ISM manufacturing index stayed in positive growth territory and many companies, including QUALCOMM and Mastercard, reported strong profits. Thus far for the Third Quarter, S&P 500® companies have increased earnings nearly 18% over last year. In the final analysis, fundamentals determine investment returns. As long as the fundamentals remain positive we believe the markets will eventually provide equity investors with a positive treat.

The S&P 500® closed down -2.5% for the week.  The top-performing sectors in the S&P 500® Index included Utilities (-0.4%) and Telecommunications (-1.2%), while bottom-performing sectors included Health Care (-2.9%) and Financials (-5.4%).  In the fixed-income market, the 10-year Treasury gained with the yield ending the week at 2.0%.

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

Growth at a Reasonable Price

GOOGGoogle, Inc. (GOOG) has achieved worldwide name recognition with its famed Google search engine. Beyond this well-known service, the technology company also provides operating systems (Android), targeted advertising solutions (Google AdSense), a checkout service for merchants (Google Checkout), collaboration tools for organizations (Google Apps), and a host of additional online utilities such as Google Maps, Google Video, Google Docs, Google Toolbar, Google Desktop, Google Reader, and of course Gmail. ThisMountain View, California based company was founded in 1998, and prides itself on maintaining a corporate culture that encourages creativity and community.

We believe the current trend of allocating additional advertising dollars to internet search ads will continue, and that GOOG is well-positioned to benefit from this trend. With its sophisticated search engine, GOOG is able to proficiently match buyers to providers. Providers recognize the attractiveness of this service and are willing to pay for it accordingly. Recently, near-term economic conditions have placed pressure on GOOG’s stock, which has opened the door for long-term investors such as our clients. We believe the company will outperform its peers over the next three to five years.

Top 10 Equity Holdings

MasterCard Inc. 4.8%
Biogen Idec Inc. 4.3%
Qualcomm Inc. 4.1%
Google Inc. 4.0%
Danaher Corp. 4.0%
Hansen Natural Corp. 3.6%
Jabil Circuit Inc. 3.6%
Gilead Sciences Inc. 3.5%
Allergan Inc. 3.5%
EMC Corp. 3.4%

U.S. Equity Indices

Index 11/04/11 Week % Chg YTD % Chg
DJIA 11,983.2 -2.0% 3.5%
NASDAQ 2,686.2 -1.9% 1.3%
S&P 500 1,253.2 -2.5% -0.4%
Russell 1000 G 588.0 -1.7% 2.3%

U.S. Credit Rates

Index 11/04/11 10/28/11 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.9% 1.0% 2.0%
10 Year T-Note 2.0% 2.2% 3.3%
30 Year T-Bond 3.1% 3.2% 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.