News & Our Thinking

Weekly Investor

Weekly Investor – May 6, 2013

08 May 2013

Momentum Continues

Market Summary:  

The U.S. equity markets continued their climb, all posting positive returns for the week.  In fact, the end of April marked the sixth straight month of gains for the S&P 500® Index.  Tepid manufacturing growth weighed on the market but was overshadowed by better than expected home sales and employment data.  Additionally, earnings season is rapidly coming to end and of the 392 companies in the S&P 500 that have reported 1Q earnings, almost 69% have beaten expectations.  This is higher than the norm of 66%.  This week, investors prepare for the last round of earnings and hope for continued momentum.

The S&P 500® was up 1.8% for the week.  The top-performing sectors in the S&P 500® Index included Technology (4.6%) and Energy (2.9%), while bottom-performing sectors included Telecommunications (-0.2%) and Utilities       (-0.3%). In the fixed-income market, the 10-year Treasury yield closed even for the week at 1.7%.

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

Turnaround Effort

AEOAmerican Eagle Outfitters, Inc. (AEO) operates as an apparel and accessories retailer in the United States and Canada. It operates a network of retail stores that offer denims, sweaters, graphic T-shirts, fleece, outerwear, and accessories for 15 to 25-year old men and women under the American Eagle Outfitters brand name; a collection of dormwear, intimates, and personal care products for girls under the aerie brand name; and clothing and accessories for kids aged between 2 to 14 under the 77kids brand name. AEO was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.

A new CEO joined the company a year ago with a turnaround plan focused on improving profitability and sales.  Improving merchandise style and selection along with operational improvements have yielded positive results thus far.  AEO has communicated long-term goals ahead of Wall Street estimates.  With an attractive valuation and positive feedback from Main Street contacts on the turnaround efforts, we believe AEO offers favorable odds for our clients.

Top 10 Equity Holdings

Google, Inc. 5.5%
Gilead Sciences 4.4%
Lowes Cos. 4.4%
CBS Corp 4.4%
Allstate 4.1%
Danaher Corp. 3.8%
SunTrust Banks 3.6%
Qualcomm Inc. 3.5%
Procter & Gamble 3.5%
Oracle Corp. 3.4%

U.S. Equity Indices

Index 05/03/13 Week % Chg YTD % Chg
DJIA 14,974.0 1.8% 14.3%
NASDAQ 3,378.6 3.0% 11.9%
S&P 500 1,614.4 2.0% 13.2%
Russell 1000 G 741.8 2.6% 12.7%

U.S. Credit Rates

Index 05/03/13 04/26/13 12/31/12
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 0.7% 0.7% 0.8%
10 Year T-Note 1.7% 1.7% 1.8%
30 Year T-Bond 3.0% 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.