News & Our Thinking

Weekly Investor

Weekly Investor – October 24, 2011

25 January 2012

Earnings Season

Market Summary:  

The major U.S. equity indices rebounded for the second week in a row and many returned to positive territory for the year.  All eyes were once again on Europe and optimism regarding a potential resolution to the Eurozone debt worries helped kick off the rally.  The data surrounding the U.S. economy and corporate earnings was also positive this week and added fuel to the rally.  Additionally, the U.S. Leading Economic Indicator continued to climb and regional indicators of economic activity reported this past week from New York and Philadelphia showed unexpected improvement in business activity. The quarterly earnings reporting season started off strong; so far, 66% of the companies in the S&P 500® that have reported beat their earnings expectations and are on track to increase earnings +16.6% over this quarter last year – a very good start.

The S&P 500® closed up 1.1% for the week.  The top-performing sectors in the S&P 500® Index included Financials (+3.9%) and Energy (+2.8%), while bottom-performing sectors included Technology (-2.2%) and Basic Materials (-0.3%).  In the fixed-income market, the 10-year Treasury held steady with the yield ending the week at 2.2%.

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

Rising Above the Tide

BENFranklin Resources Inc. (BEN) provides investment services primarily through its own family of retail mutual funds.  Founded in 1947 and based in San Mateo, CA, BEN also manages separate accounts, which it markets to institutions, high-net-worth families, individuals, and retirement plans, both in theUnited Statesand internationally.  BEN’s products are sold to the public under well-recognized brand names such as Franklin, Templeton, Mutual Series, Bissett and Fiduciary.

With a well balanced portfolio of equity and fixed-income products, BEN successfully navigated the financial crisis.  Good performance of its products and successful expansion into markets outside of theUnited States has resulted in consistent net inflow of assets under management.   As equity markets slowly recover around the world, we believe investors will become incrementally more comfortable with equity investments and BEN is well positioned to benefit. Furthermore, at its current valuation, we believe little of these upsides are priced-in, thus representing favorable odds.

Top 10 Equity Holdings

MasterCard Inc. 4.5%
Biogen Idec Inc. 4.2%
Google Inc. 4.1%
Danaher Corp. 3.9%
Qualcomm Inc. 3.9%
Allergan Inc. 3.8%
Gilead Sciences Inc. 3.7%
Hansen Natural Corp. 3.6%
Energizer Holdings 3.6%
Jabil Circuit 3.5%

U.S. Equity Indices

Index 10/21/11 Week % Chg YTD % Chg
DJIA 11,808.8 1.4% 2.0%
NASDAQ 2,637.5 -1.1% -0.6%
S&P 500 1,238.3 1.1% -1.5%
Russell 1000 G 576.7 0.0% 0.4%

U.S. Credit Rates

Index 10/21/11 10/14/11 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.1% 1.1% 2.0%
10 Year T-Note 2.2% 2.2% 3.3%
30 Year T-Bond 3.3% 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.