News & Our Thinking

Weekly Investor

Weekly Investor – May 14, 2012

07 June 2012

An Eventful Week

Market Summary:  

The major U.S. equity averages all ended the week lower and the market’s bias was clearly negative as the S&P 500® Index, oil, copper, bond yields and gold were all down.  Additionally, JPMorgan’s announcement that its investment division suffered an unexpected $2 billion trading loss sparked a broad sell-off in other large bank stocks. However, for the second week in a row,U.S. economic data was impressive.  Last week’s positive data was led by the University of Michigan’s employment survey which surged to a record high of +16% and provided a positive counter argument to growth problem concerns. Finally, positive first-quarter earnings results continued and investors look to the coming weeks for more positive signs.

The S&P 500® closed down -2.4% for the week.  The top-performing sectors in the S&P 500® Index included Telecommunications (1.8%) and Utilities (0.9%), while bottom-performing sectors included Industrials (-1.8%) and Materials (-2.0%).  In the fixed-income market, the 10-year Treasury yield remained unchanged, closing out the week at 1.9%.

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

Favorable Odds

ESRXFounded in 1986, Express Scripts Holding Company (ESRX) provides a range of pharmacy benefit management services in North America and is headquartered in St. Louis,Missouri.

ESRX has a solid track record of delivering earnings growth through steady profitability improvement and the successful integration of acquisitions.  The recent concern over ESRX’s renewal negotiation with Walgreen’s and its plan to acquire Medco has weighed on shares since mid-2011.  Although ESRX did not reach an agreement with Walgreens for 2012, the impact to ESRX has been far less than anticipated.  Additionally, on April 2, 2012 the FTC granted ESRX official approval to acquire Medco.  We believe these recent developments present favorable odds for shares of ESRX to outperform its peers and the market.

Top 10 Equity Holdings

MasterCard Inc. 5.1%
Biogen Idec Inc. 4.7%
Qualcomm Inc. 4.2%
Gilead Sciences Inc. 4.1%
Danaher Corp. 4.0%
Google Inc. 3.8%
CBS Corp. 3.6%
EMC Corp. 3.3%
Intel Corp. 3.3%
Jabil Circuit Inc. 3.2%

U.S. Equity Indices

Index 05/11/12 Week % Chg YTD % Chg
DJIA 12,820.6 -1.7% 4.9%
NASDAQ 2,933.8 -0.8% 12.6%
S&P 500 1,353.4 -1.1% 7.6%
Russell 1000 G 639.9 -1.1% 10.2%

U.S. Credit Rates

Index 05/11/12 05/04/12 12/31/10
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.8% 0.8% 2.0%
10 Year T-Note 1.9% 1.9% 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.