News & Our Thinking

Weekly Investor

Weekly Investor – January 27, 2014

14 February 2014

An Eventful Week

Market Summary: 

U.S. equity markets declined last week as the market responded poorly to weaker-than-expected economic data originating from China as well as tepid U.S. economic data.  The HSBC January China Manufacturing PMI fell to 49.6.  An index reading below 50 suggests an economic contraction in China’s manufacturing sector and caused worry for investors.  Additionally, U.S. jobless claims for were higher than expected and the December Leading Index narrowly missed expectations.  However, despite market declines, Corporate America provided a few bright spots as earnings season continued.  Looking forward, investors hope for continued positive news from Corporate America and will pay close attention to major economic reports set for release including the January consumer confidence reading and housing data.

The S&P 500® was down 2.6% for the week.  The top-performing sectors in the S&P 500® Index included Utilities (-0.2%) and Telecommunications (-1.4%), while bottom-performing sectors included Industrials (-4.0%) and Basic Materials (-4.5%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.7%.

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

Opportunity for Growth

DHRDanaher Corp. (DHR), headquartered in Washington, D.C., is a designer, manufacturer and marketer of medical, industrial, professional and consumer products. DHR was founded in 1969 and was previously known as DMG, Inc., but later took the Danaher name in 1984. The company produces a broad range of products including electronic calibration equipment, retail/commercial petroleum products such as underground storage tank leak detection systems, high-precision optical systems for the analysis of microstructures and aerospace defense articles, among others. DHR’s primary product lines are sold in North America, Europe and Asia.

DHR has a long history of delivering consistent earnings growth through continual development of its own businesses and by acquiring businesses that are fast growing and have high returns.  Over the years, the company’s management team has demonstrated skill and discipline in selecting and integrating its many purchases.  A more recent purchase included an expansion in the water treatment industry.  This industry has strong growth potential and now DHR is a key beneficiary of this trend. Economic uncertainties have depressed DHR’s multiples, and as a result we have been presented with this buying opportunity. In the long-term, we expect DHR to outperform its peers and the market.

Top 10 Equity Holdings

Google, Inc. 6.2%
Forest Laboratories 5.0%
CBS Corp. 4.6%
MasterCard, Inc. 4.1%
SunTrust Banks 4.0%
Endo Health Solutions 4.0%
Danaher Corp. 4.0%
Amgen Inc. 3.7%
Post Holdings, Inc. 3.6%
Qualcomm Inc. 3.5%

U.S. Equity Indices

Index 01/24/14 Week % Chg YTD % Chg
DJIA 15,879.1 -3.5% -4.2%
NASDAQ 4,128.2 -1.7% -1.2%
S&P 500 1,790.3 -2.6% -3.1%
Russell 1000 G 841.3 -2.3% -2.6%

U.S. Credit Rates

Index 01/24/14 01/17/14 12/31/13
3 Month T-Bill 0.1% 0.1% 0.1%
5 Year T-Note 1.6% 1.6% 1.8%
10 Year T-Note 2.7% 2.8% 3.0%
30 Year T-Bond 3.6% 3.8% 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.