News & Our Thinking

Weekly Investor

Weekly Investor – December 2, 2013

02 December 2013

Happy Shopping?

Market Summary: 

U.S. equity markets remained relatively unchanged last week and markets were quiet due to the shortened holiday week.  The S&P 500® continued its upward climb and year-to-date is up 29%.  U.S. economic data was mixed as sales of previously sold homes did not meet expectations but unemployment claims came in much lower than forecasted.  Looking ahead to this week, investors will review a bevy of economic reports including 3Q13 GDP, the November Unemployment Rate and consumer confidence surveys.  Additionally, investors will focus on results from Black Friday and whether the decision to open some stores on Thanksgiving has a significant impact on the holiday shopping season.

The S&P 500® was up 0.1% for the week.  The top-performing sectors in the S&P 500® Index included Technology (1.8%) and Consumer Discretionary (1.1%), while bottom-performing sectors included Utilities (-1.7%) and Energy (-2.0%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.7%.

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

Favorable Odds

XLXL Group Public Limited Company (XL) provides insurance and reinsurance coverage to industrial, commercial and professional firms, as well as insurance companies and other enterprises worldwide. The company was founded in 1986 and operates in three segments: Insurance, Reinsurance and Life Operations.

XL was disproportionally hurt during the financial crisis due to its exposure to mortgage insurance and poor pre-crisis decisions.  As a result, XL has a lower profitability profile compared to its industry peers and is trading at a discount.   However, XL has a new CEO who is solving many of its issues and commercial and property casualty (P&C) insurance pricing is improving after many years of decline.  These scenarios are creating a more favorable operating environment for XL and the company is currently showing positive results in its P&C business.  We believe XL has a high upside potential and therefore offers favorable odds to our clients.

Top 10 Equity Holdings

Google, Inc. 6.0%
CBS Corp. 4.7%
Lowes Cos. 4.6%
Endo Health Solutions 4.2%
Danaher Corp. 4.1%
MasterCard, Inc. 4.0%
Forest Laboratories 4.0%
SunTrust Banks 3.9%
Amgen Inc. 3.6%
Qualcomm Inc. 3.6%

U.S. Equity Indices

Index 12/02/13 Week % Chg YTD % Chg
DJIA 16,086.4 0.1% 22.8%
NASDAQ 4,059.9 1.7% 34.5%
S&P 500 1,805.8 0.1% 26.6%
Russell 1000 G 841.0 0.5% 27.8%

U.S. Credit Rates

Index 12/02/13 11/22/13 12/31/12
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.4% 1.3% 0.8%
10 Year T-Note 2.7% 2.7% 1.8%
30 Year T-Bond 3.8% 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.