News & Our Thinking

Weekly Investor

Weekly Investor – April 8, 2013

18 April 2013

Highs and Lows

Market Summary:  

The U.S. equity markets all posted negative returns after a tumultuous week which witnessed highs and lows upon the heels of various economic reports.  Stocks fell on Monday after American manufacturing reports came in lower than expected for the month of March.  Tuesday, the S&P 500® Index closed at an all-time high as European factory orders beat expectations.  The exuberance was short lived as ADP employment and ISM manufacturing supply forecasts were worse than anticipated on Wednesday and stocks fell to their lowest point in over a month.  However, markets rebounded quickly on Thursday as Japan announced a stimulus bond buying program and the European Central Bank stated it will keep monetary policy loose for an extended period of time. Finally, markets opened down on Friday as American job growth remains slow but rallied throughout the day upon the Fed’s announcement to continue their $85B a month stimulus until the jobs outlook improves substantially.  Looking ahead, investors enter earnings season with high hopes from Corporate America.

The S&P 500® down -0.1% for the week.  The top-performing sectors in the S&P 500® Index included Telecommunications (2.4%) and Utilities (1.2%), while bottom-performing sectors included Basic Materials (-2.4%) and Technology (-2.5%). In the fixed-income market, the 10-year Treasury yield closed down for the week at 1.7%.

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

Upside Potential

STISunTrust Banks, Inc. (STI) was founded in 1891 and is headquartered in Atlanta, Georgia.  STI provides various financial services within the United States.  Historically, STI has been a solid, southeast regional bank.  However, since 2008 the severe housing bubble in Florida combined with the global financial crisis has put significant earnings and capital pressure on STI.

STI’s newly promoted CEO, Bill Rogers, is committed to lowering cost and rebuilding STI’s business.  In Argent’s view, the current depressed valuation of STI is due to the expectation of a relatively slow recovery and worries over the company’s exposure to older and troubled mortgages.  Therefore, we believe STI’s upside potential is substantial as the company works to return to a solid, healthy regional bank within the next few years and offers favorable odds for our clients.

Top 10 Equity Holdings

Google, Inc. 5.2%
Lowes Cos. 4.4%
CBS Corp 4.3%
Allstate 4.2%
Gilead Sciences 3.9%
Danaher Corp. 3.9%
Qualcomm Inc. 3.7%
Procter & Gamble 3.6%
SunTrust Banks, Inc. 3.5%
Forest Laboratories 3.4%

U.S. Equity Indices

Index 04/05/13 Week % Chg YTD % Chg
DJIA 14,565.3 -0.1% 11.1%
NASDAQ 3,203.9 -1.9% 6.1%
S&P 500 1,553.3 -1.0% 8.9%
Russell 1000 G 708.0 -1.4% 7.6%

U.S. Credit Rates

Index 04/05/13 03/28/13 12/31/12
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.7% 0.8% 0.8%
10 Year T-Note 1.7% 1.9% 1.8%
30 Year T-Bond 2.9% 3.1% 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.