News & Our Thinking

Weekly Investor

Weekly Investor – May 13, 2013

14 May 2013

Earnings Push Markets Higher

Market Summary:  

Once again the U.S. equity markets climbed to record highs last week.  The S&P 500® Index gained 19 points as positive earnings announcements continued to fuel stock market returns. Of the 425 companies in the S&P 500® Index that have reported earnings, nearly 72% have exceeded profit projections.  Additionally, global markets, including the Euro, Japan, and Chinese markets, all showed positive gains.  Positive economic data also contributed to the week and lower than expected initial jobless claims drove the markets higher and increased investor confidence.  Looking forward, earnings season is starting to wind down and investors hope for a final push of good news from Corporate America.

The S&P 500® was up 1.2% for the week.  The top-performing sectors in the S&P 500® Index included Industrials (2.4%) and Consumer Discretionary (2.2%), while bottom-performing sectors included Consumer Staples (-0.2%) and Utilities (-2.7%). In the fixed-income market, the 10-year Treasury yield closed up 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

ALLThe Allstate Corporation (ALL) engages in personal property and casualty insurance, life insurance and retirement and investment product businesses in the United States.

ALL’s current strategy includes a goal of improving its return on equity (ROE) to peer levels by 2014.  Over the past several years, personal lines insurers have suffered high losses as a result of severe weather.  In response to this phenomenon, ALL and its industry peers are raising prices for homeowners insurance. ALL achieved positive pricing restructuring in 2012 and we expect that trend to continue for 2013.   We believe the industry-wide price increases will enhance the likelihood that ALL will realize its return target.  Additionally, the stock currently trades at a discount to its peers and therefore represents favorable odds for our clients.

Top 10 Equity Holdings

Google, Inc. 5.6%
Lowes Cos. 4.6%
CBS Corp. 4.3%
Gilead Sciences 4.1%
Allstate 4.0%
Danaher Corp. 3.8%
SunTrust Banks 3.7%
Post Holdings Inc. 3.6%
Qualcomm Inc. 3.5%
Oracle Corp. 3.4%

U.S. Equity Indices

Index 05/10/13 Week % Chg YTD % Chg
DJIA 15,118.5 1.0% 15.4%
NASDAQ 3,436.6 1.7% 13.8%
S&P 500 1,633.7 1.2% 14.5%
Russell 1000 G 751.5 1.3% 14.2%

U.S. Credit Rates

Index 05/10/13 05/03/13 12/31/12
3 Month T-Bill 0.1% 0.1% 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% 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.