News & Our Thinking

Weekly Investor

Weekly Investor – August 27, 2012

28 August 2012

What Lies Ahead?

Market Summary:  

The major U.S. equity markets ended the week in negative territory.  For the S&P 500® Index last week was the first weekly decline since early July.  U.S. economic data was weakened as initial jobless claims increased and July existing and new home sales missed expectations.  Mid-week investor hesitation increased as European leaders provided tepid comments regarding the outlook of the region.  Finally, on Friday markets rose following Fed Reserve Chairman Ben Bernanke’s comment inferring that the fed would take action if needed.  Bernanke stated, “There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery”.  While a positive sign for the U.S. economy, it was not enough to drive markets into positive territory and once again investors are left pondering the influence of the Eurozone region and what lies ahead.

The S&P 500® closed down 0.5% for the week.  The top-performing sectors in the S&P 500® Index included Health Care (0.6%) and Financials (0.0%), while bottom-performing sectors included Industrials (-1.3%) and Utilities (-1.3%).  In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.7%.

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

Well Positioned for an Improving Market

QCOMQualcomm Incorporated (QCOM) is a leading provider of digital wireless communications technologies, products and services.  QCOM’s extensive intellectual property portfolio, which includes industry-leading code division multiple access (CDMA) technologies, is sold through licensing agreements with wireless network infrastructure and wireless device manufacturers, and through the sale of CDMA-based chipsets and system software.  In addition, QCOM provides a broad range of technology solutions and services to enterprise, government and transportation companies.  QCOM was founded in 1985 and is based in San Diego,California.

QCOM is well positioned to benefit from the proliferation of smartphones and wireless devices, such as the iPad and other netbooks, as QCOM supplies chips that power many such devices.  More importantly, QCOM receives royalty payments from the sale of devices that utilize QCOM’s patented technologies.  We believe the current valuation does not fully reflect QCOM’s potential earning power, assuming that double–digit growth rates in sales and earnings are achievable over the next few years.  For these reasons, we believe purchasing QCOM positions us ahead of the curve as QCOM presents favorable odds for our clients


Top 10 Equity Holdings

Google Inc. 5.1%
Biogen Idec Inc. 4.9%
Gilead Sciences Inc. 4.4%
Qualcomm Inc. 4.0%
CBS Corp. 3.9%
Danaher Corp. 3.8%
Express Scripts Holding Co. 3.7%
Jabil Circuit Inc. 3.6%
Forest Laboratories 3.6%
SunTrust Banks 3.6%

U.S. Equity Indices

Index 08/24/12 Week % Chg YTD % Chg
DJIA 13,158.0 -0.9% 7.7%
NASDAQ 3,069.8 -0.2% 17.8%
S&P 500 1,411.1 -0.5% 12.2%
Russell 1000 G 659.6 -0.4% 13.6%

U.S. Credit Rates

Index 08/24/12 08/17/12 12/30/11
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.7% 0.8% 2.0%
10 Year T-Note 1.7% 1.8% 3.3%
30 Year T-Bond 2.8% 2.9% 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.