Weekly Investor – February 19, 2013
Smooth Sailing?
Market Summary:
The U.S. equity market experienced a fairly steady week and the S&P 500® Index finished in positive territory. In fact, on Wednesday the index reached its highest level since October 2007 when jobless claims came in below consensus. However, the excitement was short lived as economic data from overseas was not enough to continue the smooth sailing. Data indicated that the recession in Europe could be worsening and Japan’s GDP shrank 0.4% amid falling exports and decreasing business metrics. Back at home, earnings season continued with mixed results. Investors look forward and hope for positive news this week.
The S&P 500® closed up 0.1% for the week. The top-performing sectors in the S&P 500® Index included Industrials (1.1%) and Financials (0.9%), while bottom-performing sectors included Energy (-0.6%) and Telecommunications (-1.5%). In the fixed-income market, the 10-year Treasury yield closed up for the week at 2.0%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
New Strategy
MasterCard, Inc. (MA), founded in 1966, operates with its subsidiaries to provide transaction processing and additional services for its credit, deposit, and ATM programs, which reach over 24,000 financial institutions worldwide. MA facilitates the authorization, clearing, and settlement of transactions, as well as markets and develops other payment-related services. MA’s brands include MasterCard, Maestro and Cirrus.
The payment transition from cash to checks to plastic is well underway in the U.S., but is in its infancy in areas abroad. We expect MA to be a prime beneficiary of this secular change, as the company enjoys high barriers to entry, basically dividing the market with Visa, Inc. (V). The positive competitive landscape will, in our belief, protect MA’s profits in the years to come, as the company increases its penetration in developing economies. Like many companies, MA has been impacted by the slowing economy; however, it has at its disposal cost cutting options to mitigate the cyclical pressures that may weigh on its earnings. Given the company’s bright long-term growth prospects and near-term ability to protect profits, we believe MA represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.3% |
| Lowes Cos. | 4.5% |
| CBS Corp. | 4.2% |
| Danaher Corp. | 4.0% |
| Allstate | 4.0% |
| Qualcomm Inc. | 3.8% |
| Ebay, Inc. | 3.7% |
| Oracle Corp. | 3.7% |
| SunTrust Banks, Inc. | 3.6% |
| Gilead Sciences | 3.4% |
U.S. Equity Indices
| Index | 02/15/13 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 13,981.8 | -0.1% | 6.7% |
| NASDAQ | 3,192.0 | -0.1% | 5.7% |
| S&P 500 | 1,519.8 | 0.1% | 6.6% |
| Russell 1000 G | 694.6 | -0.2% | 5.5% |
U.S. Credit Rates
| Index | 02/15/13 | 02/08/13 | 12/31/12 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.9% | 0.8% | 0.8% |
| 10 Year T-Note | 2.0% | 1.9% | 1.8% |
| 30 Year T-Bond | 3.2% | 3.2% | 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.
