Weekly Investor – July 16, 2012
Mixed Markets
Market Summary:
The major U.S. equity markets ended mixed as equities fell the first four days of the week before rallying on Friday. Throughout the week negative news from across the globe impacted market performance. The Shanghai Composite, which tends to lead China’s GDP, declined -1.7% and news out of the Eurozone that Peugeot closed a plant inFrance, the first in 30 years, worried investors. In the U.S., economic surveys including retail, auto and manufucaturing were all weaker than expected. However, some positives still exist, housing continues to show improvement and gas prices continue to decline. Additionally, markets applauded JP Morgan’s earnings report, despite its losses on derivative positions, as net income was better than anticipated. As earnings seasons kicks into high gear next week, investors look forward to good news from Corporate America.
The S&P 500® closed up 0.2% for the week. The top-performing sectors in the S&P 500® Index included Financials (1.6%) and Utilities (1.5%), while bottom-performing sectors included Materials (-1.3%) and Information Technology (-1.7%). In the fixed-income market, the 10-year Treasury yield remained steady closing out the week at 1.5%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
MasterCard, Inc. (MA), founded in 1966, operates with its subsidiaries to provide transaction processing and additional services for its credit, deposit, and ATM programs, which reach over 24,000 financial institutions worldwide. MA facilitates the authorization, clearing, and settlement of transactions, as well as markets and develops other payment-related services. MA’s brands include MasterCard, Maestro and Cirrus.
The payment transition from cash to checks to plastic is well underway in theU.S., but is in its infancy in areas abroad. We expect MA to be a prime beneficiary of this secular change, as the company enjoys high barriers to entry, basically dividing the market with Visa, Inc. (V). The positive competitive landscape will, in our belief, protect MA’s profits in the years to come, as the company increases its saturation in developing economies. Like many companies, MA has been impacted by the slowing economy; however, it has at its disposal cost cutting options to mitigate the cyclical pressures that may weigh on its earnings. Given the company’s bright long-term growth prospects and near-term ability to protect profits, we believe MA represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| MasterCard Inc. | 5.3% |
| Biogen Idec Inc. | 5.1% |
| Gilead Sciences Inc. | 4.2% |
| Danaher Corp. | 3.9% |
| Qualcomm Inc. | 3.7% |
| Express Scripts Holdings | 3.7% |
| Google Inc. | 3.6% |
| Lowes Cos. | 3.6% |
| CBS Corp. | 3.5% |
| Apple Computer | 3.3% |
U.S. Equity Indices
| Index | 07/13/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,777.1 | 0.0% | 4.6% |
| NASDAQ | 2,908.5 | -1.0% | 11.6% |
| S&P 500 | 1,356.8 | 0.2% | 7.9% |
| Russell 1000 G | 632.1 | -0.4% | 8.8% |
U.S. Credit Rates
| Index | 07/13/12 | 07/06/12 | 12/31/10 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.6% | 0.6% | 2.0% |
| 10 Year T-Note | 1.5% | 1.5% | 3.3% |
| 30 Year T-Bond | 2.6% | 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.
