News & Our Thinking

Weekly Investor

Weekly Investor – October 8, 2012

09 October 2012

Looking Forward

Market Summary:  

After two weeks of negative performance the S&P 500® Index returned to positive territory last week. News from the Eurozone boosted the markets as Spanish Prime Minister, Mariano Rajoy refuted any claims that Spainwould request a bailout.  Additionally, Mario Draghi, President of the European Central Bank, announced that the bank was ready to purchase the bonds of Eurozone members.  At home, both the ISM Manufacturing survey and annualized vehicle sales beat expectations as investors eagerly awaited a positive jobs report and pushed equities higher.  On Friday, the unemployment news came in better than expected with the rate dropping to 7.8%.  Some, including Jack Welch, former CEO of General Electric, questioned the government statistics, putting pressure on the market.   As we enter another earnings season, investors look forward and hope for good news from Corporate America.

The S&P 500® closed up 1.4% for the week.  The top-performing sectors in the S&P 500® Index included Financials (3.0%) and Health Care (2.6%), while bottom-performing sectors included Energy (0.3%) and Technology (-0.2%).  In the fixed-income market, the 10-year Treasury yield closed up for the week at 1.75%.

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

Positive Industry Change

ALLThe Allstate Corporation (ALL) engages in personal property and casualty insurance, life insurance and retirement and investment product businesses in the United States.

ALL’s current strategy includes a goal of improving its return on equity (ROE) to peer levels by 2014.  Over the past several years, personal lines insurers have suffered high losses as a result of severe weather.  In response to this phenomenon, ALL and its industry peers are raising prices for homeowners insurance.  In fact, ALL’s homeowner’s insurance price increases averaged approximately 8% in 2011.  We believe the industry-wide price increases will enhance the likelihood that ALL will realize its return target.  Additionally, the stock currently trades at a discount to its peers and therefore represents favorable odds for our clients.

Top 10 Equity Holdings

Google Inc. 5.5%
Gilead Sciences Inc. 5.1%
Biogen Idec Inc. 4.9%
Sun Trust Banks, Inc. 4.1%
Danaher Corp. 3.9%
Lowes Cos. 3.9%
Qualcomm Inc. 3.8%
Express Scripts Holding 3.8%
CBS Corp. 3.7%
Forest Laboratories 3.7%

U.S. Equity Indices

Index 10/05/12 Week % Chg YTD % Chg
DJIA 13610.2 1.3% 11.4%
NASDAQ 3136.2 0.6% 20.4%
S&P 500 1460.9 1.4% 16.2%
Russell 1000 G 678.1 1.2% 16.7%

U.S. Credit Rates

Index 10/05/12 09/28/12 12/30/11
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.7% 0.6% 2.0%
10 Year T-Note 1.7% 1.6% 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.