Weekly Investor – March 25, 2013
Trouble in Cyprus Continues
Market Summary:
The U.S. equity markets remained relatively unchanged last week. Stocks fell Monday and Tuesday as the battle over the proposed levy on bank deposits in Cyprus continued. The European Central Bank threatened to cut off funding by the countries banks unless the nation agreed to a bailout, reigniting fears in the Eurozone debt crisis. At home, The Federal Reserve announced its continued support of the U.S. economy as long as unemployment remains above 6.5% and inflation projections remain below 2.5%. Additionally, February existing home sales narrowly missed expectations. This week investors await Thursday’s announcement of 4Q12 U.S. GDP and jobless claims while keeping a close eye on further developments in Cyprus.
The S&P 500® closed down -0.2% for the week. The top-performing sectors in the S&P 500® Index included Consumer Staples (2.1%) and Telecommunications (1.0%), while bottom-performing sectors included Financials (-1.5%) and Basic Materials (-2.0%). In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Qualcomm Incorporated (QCOM) is a leading provider of digital wireless communications technologies, products and services. QCOM’s extensive intellectual property portfolio, which includes industry-leading code division multiple access (CDMA) technologies, is sold through licensing agreements with wireless network infrastructure and wireless device manufacturers, and through the sale of CDMA-based chipsets and system software. In addition, QCOM provides a broad range of technology solutions and services to enterprise, government and transportation companies. QCOM was founded in 1985 and is based in San Diego, California.
QCOM is well positioned to benefit from the proliferation of smartphones and wireless devices, such as the iPad and other netbooks, as QCOM supplies chips that power many such devices. More importantly, QCOM receives royalty payments from the sale of devices that utilize QCOM’s patented technologies. We believe the current valuation does not fully reflect QCOM’s potential earning power, assuming that double–digit growth rates in sales and earnings are achievable over the next few years. For these reasons, we believe purchasing QCOM positions us ahead of the curve as QCOM presents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.4% |
| CBS Corp. | 4.3% |
| Lowes Cos. | 4.3% |
| Allstate | 4.1% |
| Danaher Corp. | 3.9% |
| Qualcomm Inc. | 3.7% |
| Gilead Sciences | 3.7% |
| SunTrust Banks | 3.6% |
| Procter & Gamble | 3.5% |
| Forest Laboratories | 3.5% |
U.S. Equity Indices
| Index | 03/22/13 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 14,512.0 | 0.0% | 10.7% |
| NASDAQ | 3,245.0 | -0.1% | 7.5% |
| S&P 500 | 1,556.9 | -0.2% | 9.2% |
| Russell 1000 G | 711.0 | 0.1% | 8.0% |
U.S. Credit Rates
| Index | 03/22/13 | 03/15/13 | 12/31/12 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 0.8% | 0.8% | 0.8% |
| 10 Year T-Note | 1.9% | 2.0% | 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.
