Weekly Investor – March 24, 2014
Banks are Healthy!
Market Summary:
U.S. equity markets all posted positive returns last week. Federal Reserve Chairwoman Janet Yellen held a press conference announcing that interest rates may rise sooner than originally expected. The announcement was paired with the results of the Fed’s annual test of banks’ financial health. The test concluded that of the nation’s 30 largest banks, 29 have enough capital to withstand severe economic turmoil. Additionally, U.S. economic data continues its positive streak and the auto sector was particularly strong in February. Looking ahead, investors will pay close attention to major economic reports being released this week including, March Consumer Confidence, durable goods orders, quarter over quarter annualized GDP and initial jobless claims.
The S&P 500® was up 1.4% for the week. The top-performing sectors in the S&P 500® Index included Telecommunications (3.6%) and Financials (3.1%), while bottom-performing sectors included Consumer Discretionary (0.1%) and Utilities (-0.2%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.8%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
JP Morgan Chase & Co. (JPM) is a financial holding company that provides various financial services worldwide. Founded in 1823 and headquartered in New York, New York, JPM operates it business in several segments including investment banking, commercial banking, asset management services, retail finance services, as well as credit card and auto services.
JPM emerged from the financial crisis as one of the few financial institutions with a solid balance sheet. JPM recently demonstrated its superior financial position by passing the Federal Reserve stress tests and also obtaining approval to buyback shares and increase its dividend. Despite the headwinds of a low interest rate environment and a more onerous regulatory landscape, JPM is poised to gain market share as its weaker peers consolidate their businesses to improve their balance sheets. We believe JPM has the potential to significantly surprise on the upside as economic conditions continue to improve for the banking industry. For these reasons we have added JPM to our portfolio and believe it represents favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 6.1% |
| CBS Corp. | 4.8% |
| SunTrust Banks, Inc. | 4.0% |
| Danaher Corp. | 3.8% |
| Post Holdings, Inc. | 3.7% |
| Lincoln National | 3.6% |
| Quanta Services, Inc. | 3.6% |
| Amgen, Inc. | 3.6% |
| Qualcomm Inc. | 3.5% |
| JP Morgan Chase | 3.4% |
U.S. Equity Indices
| Index | 03/21/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,302.8 | 1.5% | -1.7% |
| NASDAQ | 4,276.8 | 0.7% | 2.4% |
| S&P 500 | 1,866.5 | 1.4% | 1.0% |
| Russell 1000 G | 873.8 | 0.8% | 1.2% |
U.S. Credit Rates
| Index | 03/21/14 | 03/14/14 | 12/31/13 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.7% | 1.5% | 1.8% |
| 10 Year T-Note | 2.8% | 2.7% | 3.0% |
| 30 Year T-Bond | 3.6% | 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.
