Weekly Investor – August 20, 2012
Strong Earnings Continue
Market Summary:
The major U.S. equity markets continued to rally last week as the S&P 500® approached this year’s high watermark. U.S. economic data was positive overall as initial jobless claims were inline with expectations and retail sales improved for the first time in four months. Additionally, building permits hit a four year high and markets ticked higher when Angela Merkel, the German Chancellor, reiterated her support for the ECB’s plan to fight the Eurozone crisis. Finally, corporate earnings reports remained strong and boosted equity market performance. However, as earnings season comes to a close, investors will shift their attention back to macroeconomic data and direction from Europe.
The S&P 500® closed up 0.9% for the week. The top-performing sectors in the S&P 500® Index included Information Technology (2.3%) and Consumer Discretionary (1.8%), while bottom-performing sectors included Telecommunications (-0.7%) and Utilities (-1.5%). In the fixed-income market, the 10-year Treasury yield closed up for the week at 1.8%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Post Holdings, Inc. (POST) engages in the manufacture, marketing, and distribution of branded ready-to-eat cereals in the United States and Canada. The company was founded in 1897 and is based in St. Louis, Missouri.
POST previously operated as a subsidiary of Ralcorp Holdings Inc. (RAH), a current Argent holding. However, as of February 2012, POST was spun off from RAH to operate independently as part of a value creating plan to maximize value for shareholders. We approve of the plan and think highly of POST’s current management team and their ability to drive value creation for shareholders. Additionally, POST is the number three player among branded cereal companies and possesses strong brands and impressive cash flow generation. While turn-around efforts will certainly take time, we believe increasing POST’s position within our portfolio creates favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Biogen Idec Inc. | 4.8% |
| Gilead Sciences, Inc. | 4.4% |
| Qualcomm Inc. | 4.0% |
| Google Inc. | 4.0% |
| Danaher Corp. | 3.9% |
| CBS Corp. | 3.8% |
| Express Scripts Holding Co. | 3.7% |
| SunTrust Banks Inc. | 3.6% |
| Jabil Circuit Inc. | 3.6% |
| Lowes Cos. | 3.6% |
U.S. Equity Indices
| Index | 08/17/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 13,275.2 | 0.5% | 8.7% |
| NASDAQ | 3,076.6 | 1.8% | 18.1% |
| S&P 500 | 1,418.2 | 0.9% | 12.8% |
| Russell 1000 G | 662.6 | 1.4% | 14.1% |
U.S. Credit Rates
| Index | 08/1712 | 08/10/12 | 12/30/11 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.8% | 0.7% | 2.0% |
| 10 Year T-Note | 1.8% | 1.7% | 3.3% |
| 30 Year T-Bond | 2.9% | 2.8% | 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.
