Weekly Investor – June 11, 2012
A Balancing Act
Market Summary:
The major U.S. equity averages all gained positive ground this week as the S&P 500® Index rose +3.7%. However, despite the positive markets, gloomy news from around the globe dominated headlines. The Eurozone sank deeper into a recession as Spain announced that its situation had reached critical levels as the country had trouble obtaining financing. Thursday, equity investors looking to Chairman Bernanke for direction were disappointed as he revealed little regarding the Fed’s plans to avert a potential slowdown caused byEurope. Finally, China cut interest rates for the first time since 2008 in an effort to stimulate activity, but the move further reflected the fear of a global slowdown. Once again, investors are left performing a balancing act between the potential for improving equity market conditions on one side and uncertain global concerns on the other.
The S&P 500® closed up 3.7% for the week. The top-performing sectors in the S&P 500® Index included Financials (4.7%) and Materials (4.4%), while bottom-performing sectors included Telecommunications (2.7%) and Consumer Staples (2.6%). In the fixed-income market, the 10-year Treasury yield rose, closing out the week at 1.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Growth at a Reasonable Price
Google, Inc. (GOOG) has achieved worldwide name recognition with its famed Google search engine. Beyond this well-known service, the technology company also provides 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. This Mountain 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. | 5.2% |
| Biogen Idec Inc. | 4.8% |
| Gilead Sciences Inc. | 4.1% |
| Qualcomm Inc. | 4.0% |
| Danaher Corp. | 4.0% |
| Google Inc. | 3.7% |
| CBS Corp. | 3.7% |
| Intel Corp. | 3.3% |
| EMC Corp. | 3.2% |
| eBay Inc. | 3.2% |
U.S. Equity Indices
| Index | 06/08/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,554.2 | 3.6% | 2.8% |
| NASDAQ | 2,858.4 | 4.0% | 9.7% |
| S&P 500 | 1,325.7 | 3.7% | 5.4% |
| Russell 1000 G | 623.6 | 3.5% | 7.3% |
U.S. Credit Rates
| Index | 06/08/12 | 06/01/12 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.7% | 0.6% | 2.0% |
| 10 Year T-Note | 1.6% | 1.5% | 3.3% |
| 30 Year T-Bond | 2.7% | 2.5% | 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.
