Weekly Investor – April 14, 2014
Rocky Start to Earnings Season
Market Summary:
U.S. equity markets all struggled last week as the initial round of first quarter corporate earnings reports began poorly. JP Morgan (JPM) announced that they had missed earnings and revenue expectations. JPM’s CEO, Jamie Dimon credited the poor performance to industry-wide headwinds in the security markets and mortgage portions of the bank. The Federal Reserve’s meeting minutes provided a bright spot in the week and helped to ease concerns about the timing of future interest rate increases. Additionally, despite the market downdraft, U.S. economic reports were generally positive. Jobless claims came in better than expected and the University of Michigan’s April confidence survey revealed that consumer sentiment has reached its highest level since last summer. Looking ahead to this week, investors will pay close attention to the continuation of first quarter earnings season to gain a better understanding of the direction and strength of Corporate America.
The S&P 500® was down 2.4% for the week. The top-performing sectors in the S&P 500® Index included Utilities (0.5%) and Consumer Staples (-0.3%), while bottom-performing sectors included Financials (-4.0%) and Health Care (-4.0%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
Mallinckrodt plc (MNK) develops, manufactures, markets and distributes branded and generic specialty pharmaceuticals, active pharmaceutical ingredients and diagnostic imaging agents worldwide.
MNK is the product of a recent spin-off from Covidien (COV). As a newly independent company, MNK will be able to utilize its resources to transform itself into a focused, higher growth specialty pharmaceutical company. MNK’s core business as a leading pain and generic drug manufacturer offer high barriers to entry as well as emerging growth opportunities from its internal research and development. Additionally, MNK has a strong balance sheet which provides attractive potential for value creating acquisitions in the future. For these reasons we have added MNK to our portfolio as we believe the company offers favorable odds to our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.9% |
| CBS Corp. | 4.6% |
| SunTrust Banks, Inc. | 4.0% |
| Danaher Corp. | 3.9% |
| Qualcomm, Inc. | 3.7% |
| Quanta Services, Inc. | 3.7% |
| The Dow Chemical Co. | 3.5% |
| Schlumberger LTD | 3.5% |
| Amgen, Inc. | 3.4% |
| Oracle Corp. | 3.4% |
U.S. Equity Indices
| Index | 04/11/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,026.7 | -2.4% | -3.3% |
| NASDAQ | 3,999.7 | -3.1% | -4.2% |
| S&P 500 | 1,815.7 | -2.6% | -1.8% |
| Russell 1000 G | 838.8 | -2.8% | -2.9% |
U.S. Credit Rates
| Index | 04/11/14 | 04/04/14 | 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 | 2.6% | 2.7% | 3.0% |
| 30 Year T-Bond | 3.5% | 3.6% | 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.
