Weekly Investor – November 12, 2012
Political Uncertainty Remains
Market Summary:
The U.S. equity markets pulled back and the treasury market rallied in the wake of the U.S. Presidential election. With the fiscal cliff looming, the question now is whether political gridlock will lead us over the fiscal cliff or whether bipartisan cooperation can solve the matter in the reasonable future. Current market conditions are likely to promote continued equity market volatility as conflicting themes remain the same – weakness in Europe, improvement in U.S. housing and other economic data and, despite the outcome of the election, political uncertainty in the U.S. With the end to an earnings season in which growth was difficult to come by, the beginning to the holiday shopping season and all eyes on Washington, the equity markets will continue to have a lot to digest.
The S&P 500® closed down 2.4% for the week. The top-performing sectors in the S&P 500® Index included Basic Materials (-1.3%) and Industrials (-1.6%), while bottom-performing sectors included Telecommunications (-3.6%) and Utilities (-4.6%). In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.61%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
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Production Catalyst
Founded in 1879 and based in San Ramon, California, Chevron Corporation (CVX) engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream, which involves the exploration, development and production of crude oil and natural gas and Downstream, which engages in the refining of crude oil into petroleum products. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005.
Although CVX’s production growth forecast is muted over the next few years, we believe the anticipated addition of two natural gas fields in Australia during 2015 will change CVX’s growth profile dramatically. The change in production from these fields, as well as other projects CVX is undertaking, should drive a re-rating of the company to peer levels. The combination of higher production and the potential for higher valuation give Argent confidence that CVX represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.0% |
| Lowes Cos. | 4.1% |
| Qualcomm Inc. | 4.0% |
| Sun Trust Banks, Inc. | 3.8% |
| Danaher Corp. | 3.8% |
| CBS Corp. | 3.8% |
| Ebay, Inc. | 3.6% |
| Forest Laboratories | 3.5% |
| Express Scripts Holdings | 3.3% |
| Mastercard, Inc. | 3.3% |
U.S. Equity Indices
| Index | 11/09/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,815.4 | -2.1% | 4.9% |
| NASDAQ | 2,904.9 | -2.6% | 11.5% |
| S&P 500 | 1,379.9 | -2.4% | 9.7% |
| Russell 1000 G | 638.5 | -2.1% | 9.9% |
U.S. Credit Rates
| Index | 11/09/12 | 11/02/12 | 12/30/11 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.6% | 0.7% | 2.0% |
| 10 Year T-Note | 1.6% | 1.7% | 3.3% |
| 30 Year T-Bond | 2.7% | 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.
