Weekly Investor – November 19, 2012
The Song Remains the Same
Market Summary:
Investors experienced a busy week in which many of the uncertainties facing the U.S. and global economy were reinforced. Data confirmed that the economies in Europe and Japan are in recession, while China experienced leadership change against the backdrop of a slowing economy. Tensions in the Middle East remained high as Israel and Hamas exchanged rocket fire, although the oil markets have remained orderly for now. On the U.S. front, the news continues to be dominated by budget negotiations around the Fiscal Cliff. Continued strong data from the housing industry was dampened by the noise around unemployment claims in the wake of Sandy, although most experts believe that claims will normalize in future months. With current market conditions overwhelmed by signals from Washington, equity volatility is likely to remain elevated for the foreseeable future.
The S&P 500® closed down 1.4% for the week. The top-performing sectors in the S&P 500® Index included Consumer Discretionary (-0.7%) and Health Care (-0.7%), while bottom-performing sectors included Basic Materials (-2.3%) and Industrials (-2.3%). In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.58%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Experienced Acquirer
Danaher Corp. (DHR), headquartered in Washington, D.C., is a designer, manufacturer and marketer of medical, industrial, professional and consumer products. The company produces a broad range of products including electronic calibration equipment, retail/commercial petroleum products such as underground storage tank leak detection systems, high-precision optical systems for the analysis of microstructures and aerospace defense articles, among others. DHR’s primary product lines are sold in North America, Europe and Asia.
DHR has a long history of delivering consistent earnings growth through continual development of its own businesses and by acquiring businesses that are fast growing and have high returns. Over the years, the company’s management team has demonstrated skill and discipline in selecting and integrating its many purchases. A more recent purchase included an expansion in the water treatment industry. This industry has strong growth potential and now DHR is a key beneficiary of this trend. Economic uncertainties have depressed DHR’s multiples, and as a result we have been presented with this buying opportunity. In the long-term, we expect DHR to outperform its peers and the market.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 4.9% |
| Lowes Cos. | 4.2% |
| Qualcomm Inc. | 4.1% |
| Danaher Corp. | 3.8% |
| Suntrust Banks | 3.8% |
| CBS Corp. | 3.7% |
| Ebay, Inc. | 3.6% |
| Gilead Sciences, Inc. | 3.5% |
| Forest Laboratories | 3.4% |
| Mastercard, Inc. | 3.3% |
U.S. Equity Indices
| Index | 11/16/12 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 12,588.3 | -1.8% | 3.0% |
| NASDAQ | 2,853.1 | -1.8% | 9.5% |
| S&P 500 | 1,359.9 | -1.4% | 8.1% |
| Russell 1000 G | 630.0 | -1.3% | 8.5% |
U.S. Credit Rates
| Index | 11/16/12 | 11/09/12 | 12/30/11 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.6% | 0.6% | 2.0% |
| 10 Year T-Note | 1.6% | 1.6% | 3.3% |
| 30 Year T-Bond | 2.7% | 2.7% | 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.
