Weekly Investor – March 31, 2014
Mixed Economic Data & Stress Test!
Market Summary:
U.S. equity markets ended the week down as investors took profits from many stocks with large run-ups in price. Russia remained top of mind for investors as President Obama cautioned of further consequence for the annexation of Crimea. Domestic economic data was mixed. February Durable Goods Orders beat expectations, rising 2.2% and 4th quarter GDP was revised upward to 2.6% from 2.4%. However, new home sales fell to their lowest point in five months as a colder-than-normal winter, higher interest rates and limited supply impacted sales. Finally, the Federal Reserve continued to release the results of its recent stress tests within the banking industry. This week, Citigroup Inc.’s capital plan failed as the Fed called into question the ability of the bank’s management to adequately project losses of its global operations. However, Bank of America and JP Morgan Chase both passed. JP Morgan increased its dividend and authorized a $6.5 billion buyback. Looking ahead, investors prepare for first quarter earnings reports to begin and hope for positive news from Corporate America.
The S&P 500® was down 0.5% for the week. The top-performing sectors in the S&P 500® Index included Energy (2.5%) and Telecommunications (1.7%), while bottom-performing sectors included Basic Materials (-1.4%) and Consumer Discretionary (-2.1%). 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 to Outperform
Lincoln National Corporation (LNC) engages in multiple life insurance and retirement businesses within the United States and sells a range of wealth protection, accumulation and retirement income products and solutions. LNC was founded in 1904 and is headquartered in Radnor, Pennsylvania.
Similar to its industry peers, LNC’s profit has been significantly impacted by the low interest rate environment. However, improving economic signals are currently leading the Federal Reserve to slowly to reverse its monetary policy. This change should lead to a gradual climb in interest rates and thus a much improved operating environment for LNC. Additionally, the improving U.S. economy indicates higher potential demand for LNC’s products. We believe LNC is well positioned to benefit from steady U.S. economic improvement and offers favorable odds to our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.9% |
| CBS Corp. | 4.7% |
| SunTrust Banks, Inc. | 3.9% |
| Danaher Corp. | 3.8% |
| Quanta Services, Inc. | 3.7% |
| Qualcomm, Inc. | 3.6% |
| Amgen, Inc. | 3.6% |
| Lincoln National | 3.5% |
| JP Morgan Chase | 3.5% |
| Post Holdings, Inc. | 3.4% |
U.S. Equity Indices
| Index | 03/28/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,323.1 | 0.1% | -1.5% |
| NASDAQ | 4,155.8 | -2.8% | -0.5% |
| S&P 500 | 1,857.6 | -0.5% | 0.5% |
| Russell 1000 G | 862.6 | -1.3% | -0.1% |
U.S. Credit Rates
| Index | 03/28/14 | 03/21/14 | 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 | 2.7% | 2.8% | 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.
