Weekly Investor – January 03, 2012
Happy New Year!
Market Summary:
The U.S. equity averages ended this past week lower, keeping the major indices nearly flat for the year. In fact, this year the S&P 500® changed the least of any year since 1970 when it closed down -0.1%. While the showing by the S&P 500 was not as strong on an absolute basis as most of us wished, it was a stalwart showing in the face of double-digit percentage declines for most other major markets. The equity markets reflected the relative economic pictures from around the world. TheU.S.economy, while not robust, grew more than expected in the second half of the year. Europe appears to be entering a recession as it continues to struggles with debt problems and developing economies are facing slower growth. As we enter 2012, the biggest unknown remains the European situation. Overall, the earnings yield for the S&P 500 is 8.2% based on 2012 earnings estimates, compared to 1.9% yields on 10-year treasury notes. We feel this reflects a positive risk/reward tradeoff between equities and bonds.
The S&P 500® closed down -0.6% for the week. The top-performing sectors in the S&P 500® Index included Telecommunications (+0.7%) and Utilities (+0.3%), while bottom-performing sectors included Financials (-1.3%) and Basic Materials (-1.2%). In the fixed-income market, the 10-year Treasury closed up for the week at 1.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
New Product Cycle
NVIDIA Corp. (NVDA) provides visual computing technologies that generate interactive graphics on workstations, personal computers, game consoles and mobile devices. NVDA was founded in 1993 and is headquartered in Santa Clara, California.
Recently, NVDA successfully launched a new line of graphics chips that reversed a two year trend of market share loss. In addition, NVDA is experiencing favorable adoption for its second generation Tegra chip, designed specifically for wireless mobile devices such as smartphones and tablets. Given Tegra’s market leadership and the potential its conservative multi-year plan has relative to the increasing popularity and demand for smartphones and tablets, we believe NVDA has the potential to outperform expectations. Furthermore, we believe NVDA’s current valuation does not fully reflect the sale and profit growth potential of the company, creating upside potential or favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| MasterCard Inc. | 5.0% |
| Google Inc. | 4.3% |
| Biogen Idec Inc. | 4.2% |
| Qualcomm Inc. | 4.0% |
| Danaher Corp. | 3.9% |
| Allergan Inc. | 3.7% |
| Energizer Holdings | 3.6% |
| Hansen Natural Corp. | 3.6% |
| Jabil Circuit Inc. | 3.5% |
| Gilead Sciences Inc. | 3.5% |
U.S. Equity Indices
| Index | 12/30/11 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,217.6 | -0.6% | 5.5% |
| NASDAQ | 2,605.2 | -0.5% | -1.8% |
| S&P 500 | 1,257.6 | -0.6% | 0.0% |
| Russell 1000 G | 580.9 | -0.5% | 1.1% |
U.S. Credit Rates
| Index | 12/30/11 | 12/23/11 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.8% | 1.0% | 2.0% |
| 10 Year T-Note | 1.9% | 2.0% | 3.3% |
| 30 Year T-Bond | 2.9% | 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.
