Weekly Investor – August 13, 2012
Earnings Save the Day
Market Summary:
The major U.S. equity markets ended the week in positive territory as a convincing package of U.S. data fell to the positive side. Unemployment claims, bank loans, hotel revenues and housing all showed marked improvement. Additionally, 65% of 2Q12 earnings reports have beat expectations. While this is only slightly above average, it is much better than originally feared. Dampening the positive news was a report from China which showed July’s export growth at 1% year-over-year, declining from an 11.3% growth rate in June. China’s Import Price Index, expected to increase by 0.2%, also failed to produce good news as it declined -0.6%. This week investors will remain focused on a few key issues abroad. Greece is expected to issue estimates for its second quarter GDP and a volatile week is expected for Japanese and Chinese markets as both countries struggle with plunging nominal GDP growth. Investors hope for more good news from Corporate America to save the day.
The S&P 500® closed up 1.1% for the week. The top-performing sectors in the S&P 500® Index included Materials (2.8%) and Energy (2.3%), while bottom-performing sectors included Consumer Staples (-0.4%) and Utilities (-0.9%). In the fixed-income market, the 10-year Treasury yield had a slight gain closing out the week at 1.7%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Principal Financial Group, Inc. (PFG) is a provider of retirement savings, investment and insurance products and services. The company’s United States and International operations are engaged in asset accumulation and asset management. In addition, PFG provides a range of insurance solutions, including individual and group life insurance, group health insurance, individual and group disability insurance and group dental and vision insurance.
As credit markets have normalized, PFG’s book value has risen substantially, thus increasing the company’s liquidity and providing PFG the kind of stability that investors have come to expect from the company. While PFG’s life insurance segment should grow in-line with the market, we expect PFG’s higher growth 401(k) franchise to differentiate the company from its peers. Trading at a discount to its historic average with a stabilized balance sheet and improving business prospects, PFG represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Biogen Idec Inc. | 4.9% |
| Gilead Sciences, Inc. | 4.5% |
| Qualcomm Inc. | 4.0% |
| Danaher Corp. | 3.9% |
| Google Inc. | 3.9% |
| CBS Corp. | 3.9% |
| Express Scripts Holding Co. | 3.8% |
| Jabil Circuit, Inc. | 3.5% |
| Lowes Cos | 3.5% |
| EMC Corp. | 3.4% |
U.S. Equity Indices
| Index | 08/10/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 13,208.0 | 0.9% | 8.1% |
| NASDAQ | 3,020.9 | 1.8% | 16.0% |
| S&P 500 | 1405.9 | 1.1% | 11.8% |
| Russell 1000 G | 653.2 | 0.9% | 12.5% |
U.S. Credit Rates
| Index | 08/10/12 | 08/03/12 | 12/30/11 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.7% | 0.7% | 2.0% |
| 10 Year T-Note | 1.7% | 1.6% | 3.3% |
| 30 Year T-Bond | 2.8% | 2.6% | 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.
