News & Our Thinking

Weekly Investor

Weekly Investor – November 11, 2013

12 November 2013

Good News!

Market Summary: 

U.S. equity markets ended the week mostly positive due in large part to an array of positive economic data.  The U.S. October jobs report beat expectations as 204,000 jobs were added versus estimates of 120,000.  Additionally, a stronger-than-expected third quarter GDP growth rate of 2.8% outpaced both previous quarters and sent markets higher. The positive economic news spurred the ongoing discussion over whether or not the Fed should begin tapering but the discussion did not sway equity markets. Corporate earnings announcements continued and overall were mostly positive.  Thus far, approximately 68% of companies in the S&P 500® Index have posted positive earnings surprises and earnings have increased by 4.1% year over year.  Going forward, investors can continue to find value in equities, especially on a relative basis and hope for more good news from Corporate America.

The S&P 500® was up 0.5% for the week.  The top-performing sectors in the S&P 500® Index included Basic Materials (1.2%) and Financials (1.1%), while bottom-performing sectors included Utilities (-0.4%) and Telecommunications (-2.1%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.8%.

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

Favorable Odds

QCOMQualcomm Incorporated (QCOM) is a leading provider of digital wireless communications technologies, products and services.  QCOM’s extensive intellectual property portfolio, which includes industry-leading code division multiple access (CDMA) technologies, is sold through licensing agreements with wireless network infrastructure and wireless device manufacturers, and through the sale of CDMA-based chipsets and system software.  In addition, QCOM provides a broad range of technology solutions and services to enterprise, government and transportation companies.  QCOM was founded in 1985 and is based in San Diego, California.

QCOM is well positioned to benefit from the proliferation of smartphones and wireless devices, such as the iPad and other netbooks, as QCOM supplies chips that power many such devices.  More importantly, QCOM receives royalty payments from the sale of devices that utilize QCOM’s patented technologies.  We believe the current valuation does not fully reflect QCOM’s potential earning power, assuming that double–digit growth rates in sales and earnings are achievable over the next few years.  For these reasons, we believe purchasing QCOM positions us ahead of the curve as QCOM presents favorable odds for our clients.

Top 10 Equity Holdings

Google, Inc. 5.9%
CBS Corp. 4.8%
Lowes Cos. 4.8%
Danaher Corp. 4.1%
MasterCard, Inc. 4.0%
SunTrust Banks 3.9%
Forest Laboratories 3.8%
Endo Health Solutions 3.8%
Amgen Inc. 3.7%
Schlumberger LTD 3.5%

U.S. Equity Indices

Index 11/08/13 Week % Chg YTD % Chg
DJIA 15,761.7 0.9% 20.3%
NASDAQ 3,919.2 -0.1% 29.8%
S&P 500 1,770.6 0.5% 24.1%
Russell 1000 G 821.2 0.0% 24.8%

U.S. Credit Rates

Index 11/08/13 11/01/13 12/31/12
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.4% 1.4% 0.8%
10 Year T-Note 2.8% 2.6% 1.8%
30 Year T-Bond 3.9% 3.7% 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.