Weekly Investor – January 6, 2014
Welcome 2014
Market Summary:
U.S. equity markets finished the first week of 2014 slightly down as investors sold equities and reduced some of their exposure to U.S. stocks. However, in 2013 the Dow Jones Industrial Average posted its biggest annual gain in 18 years on improving company fundamentals and expanding multiples. Economic data was mostly positive as construction spending and manufacturing indexes were above expectations. Month-over-month pending home sales also turned positive for the first time since May. Looking at the year ahead, investors may expect equity markets to continue to deliver gains but not at the same level as 2013. As multiples are near historic averages, future gains are likely to come from earnings growth. Wall Street analysts agree and predict earnings for the S&P 500® Index to grow by 10.6% in 2014. If all goes as planned, 2014 could be another agreeable year for investors.
The S&P 500® was up 2.4% for the week. The top-performing sectors in the S&P 500® Index included Financials (0.4%) and Consumer Discretionary (0.0%), while bottom-performing sectors included Utilities (-1.3%) and Energy (-1.5%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 3.0%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Founded in 1879 and based in San Ramon, California, Chevron Corporation (CVX) engages in petroleum, chemicals, mining, power generation and energy operations worldwide. It operates in two segments, Upstream, which involves the exploration, development and production of crude oil and natural gas and Downstream, which engages in the refining of crude oil into petroleum products. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005.
Although CVX’s production growth forecast is muted over the next few years, we believe the anticipated addition of two natural gas fields in Australia during 2015 will change CVX’s growth profile dramatically. The change in production from these fields, as well as other projects CVX is undertaking, should drive a re-rating of the company to peer levels. The combination of higher production and the potential for higher valuation give Argent confidence that CVX represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 6.1% |
| CBS Corp. | 5.0% |
| Lowes Cos. | 4.6% |
| Forest Laboratories | 4.5% |
| MasterCard, Inc. | 4.3% |
| Danaher Corp. | 4.1% |
| Endo Health Solutions | 3.9% |
| SunTrust Banks | 3.8% |
| Amgen Inc. | 3.5% |
| JP Morgan Chase | 3.5% |
U.S. Equity Indices
| Index | 01/03/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,470.0 | -0.1% | -0.6% |
| NASDAQ | 4,131.9 | -0.6% | -1.1% |
| S&P 500 | 1,831.4 | -0.5% | -0.9% |
| Russell 1000 G | 854.9 | -0.5% | -1.0% |
U.S. Credit Rates
| Index | 01/03/14 | 12/27/13 | 12/31/13 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.7% | 1.7% | 1.8% |
| 10 Year T-Note | 3.0% | 3.0% | 3.0% |
| 30 Year T-Bond | 3.9% | 3.9% | 4.0% |
| 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.
