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News & Our Thinking

Weekly Investor

Weekly Investor – June 25, 2012

26 June 2012

A Volatile Week

Market Summary:  

The major U.S. equity averages ended the week mixed.  Positive results from the Greek elections provided an encouraging start but were quickly overshadowed by a surge in Spanish bond yields.  The market rose mid-week upon speculation of additional Fed stimulus but back tracked after the Fed only announced an increase of Operation Twist and reduced its estimates for growth due to a deceleration in hiring.  With all the mixed signals, investors are looking ahead to this week where the Supreme Court will rule on Obama’s health care reform and the European Union will meet to discuss possible solutions.

The S&P 500® closed down 0.6% for the week.  The top-performing sectors in the S&P 500® Index included Health Care (0.8%) and Technology (0.3%), while bottom-performing sectors included Utilities (-1.9%) and Energy (-3.3%).  In the fixed-income market, the 10-year Treasury yield rose closing out the week at 1.7%.

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


New Strategy Paying Off

JBLJabil Circuit, Inc. (JBL) provides electronic manufacturing services and solutions in the Americas, Europe and Asia.  Founded in 1966 and headquartered in St. Petersburg, Florida, JBL offers electronics and mechanical design, production, product management, and after-market services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.

In the aftermath of the financial crisis, JBL refocused its business plan to accelerate the growth of its higher margins diversified manufacturing services segment while maintaining industry growth rates on its traditional businesses.  We believe JBL’s new approach will deliver longer-term sustainable margin improvement as well as earnings growth.  Since the implementation of its new strategy, JBL has improved its operating margins to pre-crisis levels.  However, JBL’s current valuation reflects skepticism of JBL’s ability to sustain its recent success.  At Argent, we see significant upside potential in JBL with reasonable downside; thus we are getting paid to take the risk.

 

Top 10 Equity Holdings


.
MasterCard Inc. 5.4%
Biogen Idec Inc. 5.0%
Gilead Sciences Inc. 4.1%
Danaher Corp. 3.9%
Qualcomm Inc. 3.8%
Google Inc. 3.6%
CBS Corp. 3.6%
Intel Corp. 3.3%
EMC Corp. 3.3%
eBay Inc. 3.2%

U.S. Equity Indices


Index 06/22/12 Week % Chg YTD % Chg
DJIA 12,640.8 -1.0% 3.5%
NASDAQ 2,892.4 0.7% 11.0%
S&P 500 1,335.0 -0.6% 6.2%
Russell 1000 G 624.8 -0.5% 7.6%

U.S. Credit Rates


Index 06/22/12 06/15/12 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.8% 0.7% 2.0%
10 Year T-Note 1.7% 1.6% 3.3%
30 Year T-Bond 2.8% 2.7% 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.