News & Our Thinking

Weekly Investor

Weekly Investor – September 3, 2013

16 September 2013

Trouble in Syria

Market Summary:  

U.S. equity markets ended the week down. The S&P 500® Index was down approximately 3% for the month of August, posting the worst monthly return since May 2012.  The week’s downturn was due in large part to the geopolitical news surrounding Syria.  Investors spent the week attempting to gauge the potential economic impact of any U.S. military action in Syria.  On Monday, U.S. Secretary of State John Kerry stated that Syrian President Bashar al-Assad would be held accountable for using chemical weapons against its own people.  Later in the week, it seemed that both Britain and France were closer to a military strike against Syria but Britain retreated from that stance as the week progressed.  Additionally, U.S. economic data including durable goods orders, personal income, personal spending, home sales and home prices all came in below expectations.  Going into the holiday shortened week, investors continue to watch for any news related to developments in Syria.

The S&P 500® was down 1.0% for the week.  The top-performing sectors in the S&P 500® Index included Energy (0.4%)  and  Health Care (-0.3%), while bottom-performing sectors included Financials (-1.7%) and Telecommunications (-2.3%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.8%.

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

New Strategy

JBLJabil Circuit, Inc. (JBL) provides electronic manufacturing services and solutions in the Americas, Europe and Asia.  Founded in 1966 and headquartered in St. Petersburg, Florida, JBL offers electronics and mechanical design, production, product management, and after-market services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.

In the aftermath of the financial crisis, JBL refocused its business plan to accelerate the growth of its higher margins diversified manufacturing services segment while maintaining industry growth rates on its traditional businesses.  We believe JBL’s new approach will deliver longer-term sustainable margin improvement as well as earnings growth.  Since the implementation of its new strategy, JBL has improved its operating margins to pre-crisis levels.  However, JBL’s current valuation reflects skepticism of JBL’s ability to sustain its recent success.  At Argent, we see significant upside potential in JBL with reasonable downside; thus we are getting paid to take the risk.

Top 10 Equity Holdings

Google, Inc. 5.3%
Lowes Cos 4.9%
Gilead Sciences 4.7%
CBS Corp. 4.5%
Danaher Corp 3.9%
SunTrust Banks 3.8%
Forest Laboratories 3.7%
Qualcomm Inc. 3.5%
Citrix Systems, Inc. 3.5%
MasterCard, Inc. 3.5%

U.S. Equity Indices

Index 08/30/13 Week % Chg YTD % Chg
DJIA 14,891.8 -0.8% 13.6%
NASDAQ 3,630.0 -0.8% 20.2%
S&P 500 1,647.7 -1.0% 15.5%
Russell 1000 G 759.7 -0.7% 15.4%

U.S. Credit Rates

Index 08/30/13 08/23/13 12/31/12
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.6% 1.6% 0.8%
10 Year T-Note 2.8% 2.8% 1.8%
30 Year T-Bond 3.7% 3.8% 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.