News & Our Thinking

Weekly Investor

Weekly Investor – January 30, 2012

14 February 2012

Stock Market Notches Fourth Straight Gain

Market Summary:  

The major U.S. equity averages ended this past week higher primarily due to the Federal Reserve’s statement that it intends to keep short-term interest rates near zero until at least 2014. This highly accommodative stance sent stocks up on Wednesday and overshadowed generally lackluster days the rest of the week.  The NASDAQ was the best-performing stock market average last week thanks to incredibly strong earnings from Apple (AAPL), which is a large weight within that benchmark.  Overall, earnings season remains in full swing but the results so far are mixed: roughly 60% of the companies reporting thus far have exceeded analyst earnings expectations compared to an average of 69%, but only 38% have exceeded revenue expectations. Continued strong news about the U.S. economy should help the U.S. equity averages.

The S&P 500® closed up +0.1% for the week.  The top-performing sectors in the S&P 500® Index included Basic Materials (+1.5%) and Technology (+1.0%), while bottom-performing sectors included Consumer Staples (-0.8%) and Telecommunications (-4.3%).  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.

Well Positioned for an Improving Market

QCOMMQualcomm Incorporated (QCOM) is a leading provider of digital wireless communications technologies, products and services.  QCOM’s extensive intellectual property portfolio, which includes industry-leading code division multiple access (CDMA) technologies, is sold through licensing agreements with wireless network infrastructure and wireless device manufacturers, and through the sale of CDMA-based chipsets and system software.  In addition, QCOM provides a broad range of technology solutions and services to enterprise, government and transportation companies.  QCOM was founded in 1985 and is based in San Diego,California.

QCOM is well positioned to benefit from the proliferation of smartphones and wireless devices, such as the iPad and other tablets, as QCOM supplies chips that power many such devices.  More importantly, QCOM receives royalty payments from the sale of devices that utilize QCOM’s patented technologies.  We believe the current valuation does not fully reflect QCOM’s potential earning power, assuming that double–digit growth rates in sales and earnings are achievable over the next few years.  For these reasons, we believe purchasing QCOM positions us ahead of the curve as QCOM presents favorable odds for our clients.

Top 10 Equity Holdings

MasterCard Inc. 4.4%
Biogen Idec Inc. 4.2%
Qualcomm Inc. 4.1%
Danaher Corp. 4.1%
Gilead Sciences Inc. 4.0%
Jabil Circuit Inc. 3.9%
Google Inc. 3.8%
Monster Beverage 3.7%
Allergan Inc. 3.5%
Energizer Holdings 3.4%

U.S. Equity Indices

Index 01/27/12 Week % Chg YTD % Chg
DJIA 12,660.5 -0.5% 3.6%
NASDAQ 2,816.6 1.1% 8.1%
S&P 500 1,316.3 0.1% 4.7%
Russell 1000 G 616.0 1.1% 6.1%

U.S. Credit Rates

Index 01/27/12 01/20/12 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.8% 0.9% 2.0%
10 Year T-Note 1.9% 2.0% 3.3%
30 Year T-Bond 3.1% 3.1% 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.