News & Our Thinking

Weekly Investor

Weekly Investor – December 24, 2012

24 December 2012

The Cliff That Stole Christmas?

Market Summary:  

It was two steps forward early last week as the prospects for a budget deal brightened, then one step back as House Speaker Boehner’s “Plan B” was received like a lump of coal.  Despite the ebb and flow of the fiscal cliff debate, the U.S. equity markets showed resiliency, advancing 1.2% on the backs of quarterly GDP growth and personal consumption measures that exceeded expectations.  In addition, the markets were attentive to a few bellwether earnings reports, including a steady report from FedEx, and mergers and acquisition activity including a bid for the parent company of the New York Stock Exchange, NYSE Euronext.  As we wish all of you a continued joyous holiday season, it remains to be seen if the markets will close out the year shiny and bright.

The S&P 500® closed up 1.2% for the week.  The top-performing sectors in the S&P 500® Index included Financials (3.1%) and Technology (1.9%), while bottom-performing sectors included Telecommunications (-1.1%) and Consumer Staples (-1.2%).  In the fixed-income market, the 10-year Treasury yield closed up for the week at 1.78%.

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

Opportunistic Growth

FRXForest Laboratories, Inc. (FRX) develops, manufactures, and sells branded and generic forms of ethical drug products.  Founded in 1956 and based in New York, its principal products include Lexapro for the treatment of depression and generalized anxiety disorder; Namenda for the treatment of Alzheimer’s disease; Bystolic for the treatment of hypertension; and Savella for the management of fibromyalgia.  FRX sells its products through independent distributors to physicians, pharmacies, hospitals, managed care and other healthcare organizations.

FRX presents a unique opportunity as investors worry about the sustainability of its growth prospects beyond 2012, when its number one selling drug Lexapro goes off-patent. However, FRX has historically proven its ability to successfully navigate growth challenges and currently possesses a strong balance sheet and an extensive pipeline of late-stage products.  FRX has numerous opportunities to deliver above average growth and surprise investors, which we believe represents favorable odds for our clients.

Top 10 Equity Holdings

Google, Inc. 5.0%
Lowes Cos. 4.3%
Qualcomm Inc. 3.9%
Allstate 3.8%
Suntrust Banks 3.8%
Danaher Corp. 3.8%
CBS Corp. 3.7%
Ebay, Inc. 3.7%
Forest Laboratories 3.6%
Gilead Sciences, Inc. 3.4%

U.S. Equity Indices

Index 12/21/12 Week % Chg YTD % Chg
DJIA 13,190.8 0.4% 8.0%
NASDAQ 3,021.0 1.7% 16.0%
S&P 500 1,430.2 1.2% 13.7%
Russell 1000 G 659.8 1.2% 13.6%

U.S. Credit Rates

Index 12/21/12 12/14/12 12/30/11
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.8% 0.7% 2.0%
10 Year T-Note 1.8% 1.7% 3.3%
30 Year T-Bond 2.9% 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.