News & Our Thinking

Weekly Investor

Weekly Investor – November 28, 2011

25 January 2012

Not So Super After All

Market Summary:  

The major U.S. equity averages ended the week with another round of brutal losses for investors.  In fact, the S&P 500® finished with its worst Thanksgiving week in nearly 80 years!  All of this action was the result of a general consensus that the same problems, Eurozone crisis, U.S political landscape, Middle East tensions, all continue to deteriorate without much hope for any near term resolutions.  A failed “Super Committee” at home, along with ever-widening yields for European debt became just the latest examples of how broad today’s issues are.  As pessimism tightens its firm grip with each printed headline, it’s important for long-term investors to note that historically such uncertainty and pessimism have provided the greatest opportunities.

The S&P 500® closed down -4.7% for the week.  The top-performing sectors in the S&P 500® Index included Consumer Staples (-2.4%) and Utilities (-3.5%), while bottom-performing sectors included Energy (-6.2%) and Financials (-5.8%).  In the fixed-income market, the 10-year Treasury ended the week little changed at 2.1%.

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

Creating Growth Opportunities

HLFHerbalife LTD. (HLF) is a global network marketing company that sells weight management, nutritional supplement, fitness and personal care products.  Based in Grand Cayman,Cayman Islands, HLF offers science-based products in four principal categories:  weight management, targeted nutrition, skin nutrition, and energy, sports and fitness.

HLF has been experiencing strong growth fueled in part by its changing business model which focuses on “daily consumption” as opposed to the monthly consumption model of most fitness supplements.  HLF’s distributors operate nutrition clubs where customers are able to purchase products on a daily basis, thus eliminating large cash outlays normally required to purchase a month’s supply of product.  The daily consumption option has greatly expanded HLF’s addressable customer base.   HLF’s combination of strong fundamental performance, enhanced growth profile, and valuation at a discount to its peers offers a favorable risk / reward profile for our clients.

Top 10 Equity Holdings

MasterCard Inc. 5.0%
Biogen Idec Inc. 4.5%
Google Inc. 4.1%
Qualcomm Inc. 4.1%
Danaher Corp. 3.9%
Gilead Sciences Inc. 3.7%
Allergan Inc. 3.5%
Hansen Natural Corp. 3.5%
Jabil Circuit Inc. 3.5%
Energizer Holdings 3.4%

U.S. Equity Indices

Index 11/25/11 Week % Chg YTD % Chg
DJIA 11,231.8 -4.8% -3.0%
NASDAQ 2,441.5 -5.1% -8.0%
S&P 500 1,158.7 -4.7% -7.9%
Russell 1000 G 543.4 -4.4% -5.4%

U.S. Credit Rates

Index 11/25/11 11/18/11 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.0% 0.9% 2.0%
10 Year T-Note 2.1% 2.1% 3.3%
30 Year T-Bond 3.0% 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.