Weekly Investor – January 13, 2014
A Good Start
Market Summary:
U.S. equity markets finished the second week of 2014 mostly positive. Although markets were down on Monday due to a lower than expected ISM Non-Manufacturing Index, they rebounded Tuesday upon the positive news of a decline in the U.S. trade deficit. Later in the week, U.S. initial jobless claims decreased to 330K from 339K the previous week and beat consensus estimates of 335K. In stock news, Forest Laboratories (FRX), a current Argent holding and specialty pharmaceutical company, posted the best performance in the S&P 500® Index with a 15.73% gain. FRX announced its $2.9 billion acquisition of privately held pharmaceutical company Aptalis on Wednesday and drove the stock price higher. Looking ahead, investors prepare to digest a bevy of corporate earnings reports and hope for a good start to 2014 in the form of additional positive news from Corporate America.
The S&P 500® was up 0.6% for the week. The top-performing sectors in the S&P 500® Index included Health Care (2.7%) and Utilities (2.5%), while bottom-performing sectors included Basic Materials (-0.3%) and Telecommunications (-2.2%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.9%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Chesapeake Energy Corp. (CHK) engages in the acquisition, exploration, development and production of natural gas and oil properties in the United States. CHK was founded in 1989 and is headquartered in Oklahoma City, Oklahoma.
CHK is one of the largest leaseholders of natural gas acreage in the United States. Previously, the company earned well below its cost of capital but recently changed its compensation structure to focus on improving its return on invested cash (ROIC) and cash flow. These changes are the result of a new CEO and executive management team focused on reducing costs by drilling only on their best acreage. We believe the new changes have the potential to significantly increase earnings and therefore offer favorable odds to our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 6.1% |
| Forest Laboratories | 5.1% |
| CBS Corp. | 4.8% |
| Lowes Cos. | 4.6% |
| MasterCard, Inc. | 4.2% |
| Endo Health Solutions | 4.2% |
| Danaher Corp. | 4.0% |
| SunTrust Banks | 3.9% |
| Amgen Inc. | 3.6% |
| JP Morgan Chase | 3.4% |
U.S. Equity Indices
| Index | 01/10/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,437.1 | -0.2% | -0.8% |
| NASDAQ | 4,174.7 | 1.0% | 0.0% |
| S&P 500 | 1,842.4 | 0.6% | -0.3% |
| Russell 1000 G | 861.3 | 0.8% | -0.3% |
U.S. Credit Rates
| Index | 01/10/14 | 01/03/14 | 12/31/13 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.6% | 1.7% | 1.8% |
| 10 Year T-Note | 2.9% | 3.0% | 3.0% |
| 30 Year T-Bond | 3.8% | 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.
