Weekly Investor – October 15, 2012
A Balancing Act
Market Summary:
The major U.S. equity markets all fell last week as negative news surrounded investors. On Monday, the World Bank lowered its growth forecast for East Asia and raised concern that the slowdown in China could be worse than analysts expected. Additionally, anxiety over what direction Eurozone leaders will take in managing the regions’ debt crisis weighed heavily on investor sentiment. At home, the start of earnings season did little to impress investors. However, JPMorgan Chase & Co. exceeded earnings projections and provided some optimism as CEO, Jamie Dimon declared “the housing market has turned the corner.” Looking ahead, investors will have to balance near-term market volatility due to macroeconomic factors against favorable long-term market valuation.
The S&P 500® closed down 2.2% for the week. The top-performing sectors in the S&P 500® Index included Utilities (-0.7%) and Energy (-1.6%), while bottom-performing sectors included Consumer Discretionary (-2.9%) and Telecommunications (-4.5%). In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.66%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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Favorable Odds
Franklin Resources Inc. (BEN) provides investment services primarily through its own family of retail mutual funds. Founded in 1947 and based in San Mateo, CA, BEN also manages separate accounts, which it markets to institutions, high-net-worth families, individuals, and retirement plans, both in the United States and internationally. BEN’s products are sold to the public under well-recognized brand names such as Franklin, Templeton, Mutual Series, Bissett and Fiduciary.
With a well balanced portfolio of equity and fixed-income products, BEN successfully navigated the financial crisis. Good performance of its products and successful expansion into markets outside of the United States has resulted in consistent net inflow of assets under management. As equity markets slowly recover around the world, we believe investors will become incrementally more comfortable with equity investments and BEN is well positioned to benefit. Furthermore, at its current valuation, we believe little of these upsides are priced-in, thus representing favorable odds.
Top 10 Equity Holdings
| . | |
|---|---|
| Google Inc. | 5.5% |
| Gilead Sciences Inc. | 5.2% |
| Biogen Idec Inc. | 4.8% |
| Sun Trust Banks, Inc. | 4.1% |
| Danaher Corp. | 3.9% |
| Lowes Cos. | 3.9% |
| Express Scripts Holding | 3.8% |
| Qualcomm Inc. | 3.7% |
| Forest Laboratories | 3.7% |
| CBS Corp. | 3.5% |
U.S. Equity Indices
| Index | 10/12/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 13,328.9 | -2.1% | 9.1% |
| NASDAQ | 3,044.1 | -2.9% | 16.8% |
| S&P 500 | 1,428.6 | -2.2% | 13.6% |
| Russell 1000 G | 661.4 | -2.5% | 13.9% |
U.S. Credit Rates
| Index | 10/12/12 | 10/05/12 | 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% | 1.7% | 3.3% |
| 30 Year T-Bond | 2.8% | 3.0% | 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.
