News & Our Thinking

Weekly Investor

Weekly Investor – January 7, 2013

07 January 2013

Warm Welcome!

Market Summary:  

The U.S. equity markets ushered in 2013 with a warm welcome, as the broader market gained nearly 5%.  The biggest driver was apparent relief that the Fiscal Cliff was averted by limited tax increases and lack of spending cuts, although the stage has been set for a further mini-cliff debate in the coming months over debt ceiling and longer-term budget solutions.  The outlook for the U.S. economy was boosted as well by job and wage growth measures that exceeded many expectations, and inflation that remains in check.  Overseas, the outlook for China seems to be improving as Europe continues to languish, and prospects for a rate cut by the European Central Bank may be increasing.  As investors await earnings announcements in the coming weeks, we will be able to gauge whether the warm climate will continue for the markets.

The S&P 500® closed up 4.6% for the week.  The top-performing sectors in the S&P 500® Index included Energy (5.5%) and Financials (5.4%), while bottom-performing sectors included Utilities (3.8%) and Health Care (3.7%). In the fixed-income market, the 10-year Treasury yield closed up for the week at 1.90%.

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

Growth through Innovation

GOOGGoogle, Inc. (GOOG) has achieved worldwide name recognition with its famed Google search engine. Beyond this well-known service, the technology company also provides targeted advertising solutions (Google AdSense), a checkout service for merchants (Google Checkout), collaboration tools for organizations (Google Apps), and a host of additional online utilities such as Google Maps, Google Video, Google Docs, Google Toolbar, Google Desktop, Google Reader, and of course Gmail. This Mountain View, California based company was founded in 1998, and prides itself on maintaining a corporate culture that encourages creativity and community.

We believe the current trend of allocating additional advertising dollars to internet search ads will continue, and that GOOG is well-positioned to benefit from this trend. With its sophisticated search engine, GOOG is able to proficiently match buyers to providers. Providers recognize the attractiveness of this service and are willing to pay for it accordingly. Recently, near-term economic conditions have placed pressure on GOOG’s stock, which has opened the door for long-term investors such as our clients. We believe the company will outperform its peers over the next three to five years.

Top 10 Equity Holdings

Google, Inc. 5.2%
Lowes Cos. 4.2%
Suntrust Banks 3.9%
Danaher Corp. 3.9%
CBS Corp. 3.8%
Qualcomm Inc. 3.8%
Allstate 3.8%
Ebay, Inc. 3.6%
Forest Laboratories 3.6%
Mastercard, Inc. 3.3%

U.S. Equity Indices

Index 01/04/13 Week % Chg YTD % Chg
DJIA 13,435.2 3.8% 2.5%
NASDAQ 3,101.7 4.8% 2.7%
S&P 500 1,466.5 4.6% 2.8%
Russell 1000 G 675.4 4.4% 2.6%

U.S. Credit Rates

Index 01/04/13 12/28/12 12/30/11
3 Month T-Bill 0.1% 0.2% 0.1%
5 Year T-Note 0.8% 0.7% 0.8%
10 Year T-Note 1.9% 1.7% 1.8%
30 Year T-Bond 3.1% 2.9% 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.