News & Our Thinking

Weekly Investor

Weekly Investor – December 31, 2012

02 January 2013

Happy New Year!

Market Summary:  

As we hold our collective breath awaiting utterances from Washington, it makes sense to pause and reflect on a rewarding year for the U.S. equity markets.  The combination of solid corporate performance, slow but steady growth in the U.S. economy and reasonable valuations have led to gratifying returns for the broader markets.  To be sure, the markets endured periods of volatility through unrest in the Middle East, economic uncertainty in Europe and the theatrics of a U.S. Presidential election.  Not to be outdone, perhaps it is appropriate that the U.S. Congress closes out the year with a contentious debate over the U.S. Fiscal Cliff.  Despite all of this, the broader U.S. equity markets returned nearly 12% and valuations remain reasonable by historical standards.  With that in mind, we welcome the New Year with hopes for a successful year ahead.

The S&P 500® closed down 1.9% for the week.  The top-performing sectors in the S&P 500® Index included Basic Materials (-0.6%) and Telecommunications (-1.2%), while bottom-performing sectors included Utilities (-2.4%) and Energy (-3.0%). In the fixed-income market, the 10-year Treasury yield closed up for the week at 1.72%.

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

Growth through Innovation

GILDGilead Sciences, Inc. (GILD), a biopharmaceutical company, engages in the discovery, development, and commercialization of therapeutics for the treatment of life-threatening infectious diseases.  Notably, GILD is a leader in drug development for the treatment of human immunodeficiency virus (HIV) in adults.

After years of being a “growth darling” for investors, GILD’s stock has underperformed this past year as investors have focused on GILD’s patent expirations later this decade and questioned the company’s ability to drive growth beyond that horizon.  Despite such concern, the core business continues to execute, delivering solid sales and earnings growth.  As GILD’s drug development pipeline continues to progress, including next-generation HIV therapies, we believe investors will once again become comfortable with the company’s growth prospects, offering the potential for attractive upside from current levels.

Top 10 Equity Holdings

Google, Inc. 5.1%
Lowes Cos. 4.4%
Danaher Corp. 3.9%
Suntrust Banks 3.9%
CBS Corp. 3.8%
Qualcomm Inc. 3.8%
Allstate 3.8%
Ebay, Inc. 3.6%
Forest Laboratories 3.5%
Mastercard, Inc. 3.3%

U.S. Equity Indices

Index 12/28/12 Week % Chg YTD % Chg
DJIA 12,938.1 -1.9% 5.9%
NASDAQ 2,960.3 -2.0% 13.6%
S&P 500 1,402.4 -1.9% 11.5%
Russell 1000 G 646.7 -2.0% 11.3%

U.S. Credit Rates

Index 12/28/12 12/14/12 12/30/11
3 Month T-Bill 0.2% 0.1% 0.1%
5 Year T-Note 0.7% 0.8% 2.0%
10 Year T-Note 1.7% 1.8% 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.