News & Our Thinking

Weekly Investor

Weekly Investor – May 28, 2013

03 June 2013

What Will The Fed Do?

Market Summary:  

The U.S. equity markets ended their winning streak, posting the first weekly loss in over a month.  Fears of tightening by the Federal Reserve due to an improving unemployment outlook worried investors.  Additionally, the Chinese Purchasing Managers index contracted for the first time in seven months and weakened markets worldwide.  However, not all news was negative.  At home, strength in residential construction and autos helped U.S. durable goods orders increase 3.3% for April.  Looking forward, investors will shift their focus back to economic data and keep a close eye on revised 1Q13 GDP data.  Although the week was not positive, longer-term, an accommodative Fed, strong corporate balance sheets, increasing business investments, a strong consumer and reasonable valuations could lead markets to continued highs.

The S&P 500® was down 1.1% for the week.  The top-performing sectors in the S&P 500® Index included Health Care (0.0%) and Energy (-0.5%), while bottom-performing sectors included Telecommunications (-2.5%) and Utilities    (-3.7%). In the fixed-income market, the 10-year Treasury yield closed even for the week at 2.0%.

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

Favorable Odds

BENFranklin Resources Inc. (BEN) provides investment services primarily through its own family of retail mutual funds.  Founded in 1947 and based in San Mateo, CA, BEN also manages separate accounts, which it markets to institutions, high-net-worth families, individuals, and retirement plans, both in the United States and internationally.  BEN’s products are sold to the public under well-recognized brand names such as Franklin, Templeton, Mutual Series, Bissett and Fiduciary.

With a well balanced portfolio of equity and fixed-income products, BEN successfully navigated the financial crisis.  Good performance of its products and successful expansion into markets outside of the United States has resulted in consistent net inflow of assets under management.   As equity markets recover around the world, we believe investors will become incrementally more comfortable with equity investments and BEN is well positioned to benefit. Furthermore, at its current valuation, we believe little of these upsides are priced-in, thus representing favorable odds.

Top 10 Equity Holdings

Google, Inc. 5.5%
Lowes Co. 4.6%
CBS Corp. 4.5%
Gilead Sciences 4.3%
Allstate 3.9%
SunTrust Banks 3.8%
Danaher Corp. 3.7%
Procter & Gamble 3.5%
Qualcomm Inc. 3.5%
Oracle Corp. 3.4%

U.S. Equity Indices

Index 05/24/13 Week % Chg YTD % Chg
DJIA 15,303.1 -0.3% 16.8%
NASDAQ 3,459.1 -1.1% 14.6%
S&P 500 1,649.6 -1.1% 15.7%
Russell 1000 G 753.9 -1.3% 14.6%

U.S. Credit Rates

Index 05/24/13 05/17/13 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% 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.