News & Our Thinking

Weekly Investor

Weekly Investor – September 17, 2012

18 September 2012

A Step in the Right Direction

Market Summary:  

The major U.S. equity markets ended the week in positive territory on the heels of the Federal Reserve’s announcement of additional quantitative easing.  The Fed’s plan includes purchasing $40 billion a month of mortgage-backed securities as well as increasing other asset purchases should the labor market not improve.  Economic news was mixed for the week when industrial production fell but retail sales, especially auto, increased.  News from abroad also helped the rally.  The decision by the German Constitutional Court to approve the permanent Eurozone bail out fund was well received by the market.  Finally, Apple Inc. unveiled the iPhone 5 on the expectation that it will break all previous sales records.  Overall, it was great week and a step in the right direction for the market.  Investors look forward to more good news this week.

The S&P 500® closed up 1.9% for the week.  The top-performing sectors in the S&P 500® Index included Energy (4.1%) and Financials (3.8%), while bottom-performing sectors included Utilities   (-0.3%) and Consumer Staples (-0.1%).  In the fixed-income market, the 10-year Treasury yield closed up for the week at 1.9%.

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

Favorable Odds

STISunTrust Banks, Inc. (STI) was founded in 1891 and is headquartered in Atlanta, Georgia.  STI provides various financial services within the United States.  Historically, STI has been a solid, Southeast regional bank.  However, since 2008 the severe housing bubble in Florida combined with the global financial crisis has put significant earnings and capital pressure on STI.

STI’s newly promoted CEO, Bill Rogers, is committed to lowering cost and rebuilding STI’s business.  In Argent’s view, the current depressed valuation of STI is due to the expectation of a relatively slow recovery and worries over the company’s exposure to older and troubled mortgages.  Therefore, we believe STI’s upside potential is substantial as the company works to return to a solid, healthy regional bank within the next few years and offers favorable odds for our clients.

Top 10 Equity Holdings

Google Inc. 5.0%
Biogen Idec Inc. 4.9%
Gilead Sciences Inc. 4.6%
SunTrust Banks 4.0%
Qualcomm Inc. 4.0%
CBS Corp. 3.8%
Danaher Corp. 3.8%
Express Scripts Holdings 3.6%
Lowes Cos. 3.6%
Ebay, Inc. 3.5%

U.S. Equity Indices

Index 09/14/12 Week % Chg YTD % Chg
DJIA 13,593.4 2.2% 11.3%
NASDAQ 3,184.0 1.5% 22.2%
S&P 500 1,465.8 1.9% 16.6%
Russell 1000 G 681.5 1.5% 17.3%

U.S. Credit Rates

Index 09/14/12 09/07/12 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 1.9% 1.7% 3.3%
30 Year T-Bond 3.0% 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.