News & Our Thinking

Weekly Investor

Weekly Investor – January 22, 2013

24 January 2013

Steady as She Goes

Market Summary:  

What last week lacked in drama, it made up for in consistency.  The U.S. equity markets traded in a rather orderly fashion and gained quietly across the board, as positive reports continued regarding solid retail sales, homebuilding and subdued inflation.  Not to be outdone, the Chinese consumer exhibited good health with a better than expected retail sales reading, and the Shanghai composite gained more than 3% for the week.  While the drama of the U.S. budget debate remained backstage, Corporate America delivered a week’s worth of earnings reports that, on balance, were well received.  While the political pause of the U.S. Presidential Inauguration passes and a steady stream of corporate earnings continues, investors will stay tuned to see if the seas remain calm.

The S&P 500® closed up 0.9% for the week.  The top-performing sectors in the S&P 500® Index included Energy (2.3%) and Industrials (2.2%), while bottom-performing sectors included Technology (-0.5%) and Telecommunications        (-1.9%). In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.80%.

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

Accelerating Growth

JBLJabil Circuit, Inc. (JBL) provides electronic manufacturing services and solutions in the Americas, Europe and Asia.  Founded in 1966 and headquartered in St. Petersburg, Florida, JBL offers electronics and mechanical design, production, product management, and after-market services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.

In the aftermath of the financial crisis, JBL refocused its business plan to accelerate the growth of its higher margins diversified manufacturing services segment while maintaining industry growth rates on its traditional businesses.  We believe JBL’s new approach will deliver longer-term sustainable margin improvement as well as earnings growth.  Since the implementation of its new strategy, JBL has improved its operating margins to pre-crisis levels.  However, JBL’s current valuation reflects skepticism of JBL’s ability to sustain its recent success.  At Argent, we see significant upside potential in JBL with reasonable downside; thus we are getting paid to take the risk.

Top 10 Equity Holdings

Google, Inc. 4.9%
Lowes Cos. 4.4%
Danaher Corp. 4.0%
CBS Corp. 4.0%
Suntrust Banks 3.9%
Qualcomm, Inc. 3.8%
Allstate 3.8%
Ebay, Inc. 3.7%
Forest Laboratories 3.5%
Mastercard, Inc. 3.4%

U.S. Equity Indices

Index 01/18/13 Week % Chg YTD % Chg
DJIA 13,649.7 1.2% 4.2%
NASDAQ 3,134.7 0.3% 3.8%
S&P 500 1,486.0 0.9% 4.2%
Russell 1000 G 683.2 0.6% 3.8%

U.S. Credit Rates

Index 01/18/13 01/11/13 12/30/11
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.8% 0.8% 0.8%
10 Year T-Note 1.8% 1.9% 1.8%
30 Year T-Bond 3.0% 3.0% 3.0%
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.