Weekly Investor – June 2, 2014
Equities Succeed
Market Summary:
U.S. equities ended the holiday-shortened week in positive territory. Markets were closed on Monday in observance of Memorial Day and Tuesday, Thursday and Friday each brought new all-time highs for the S&P 500® Index. Equities were assisted by encouraging economic data such as positive durable goods orders and housing. Analysts had anticipated that durable goods orders would be down but they were actually up 0.8%. Additionally, the FHFA U.S. House Price Index showed an increase from the previous month which was also higher than expectations. Finally, U.S. initial jobless claims decreased to 300K from the previous week’s 326K and again were lower than consensus estimates of 318K. Looking ahead to this week, investors hope for more positive economic news to aid in the continuation of equity market success.
The S&P 500® was up 1.2% for the week. The top-performing sectors in the S&P 500® Index included Utilities (2.2%) and Consumer Staples (1.7%), while bottom-performing sectors included Consumer Discretionary (0.9%) and Telecommunications (0.5%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.5%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Earnings Power
Schlumberger LTD (SLB) is a global oilfield services company that employs more than 105,000 people in more than 80 countries. Operating through four “GeoMarket” regions, the company’s technologies and services help the world’s largest exploration and production (E&P) companies discover and produce the energy required to fuel the global economy. Founded in 1927 and based in Houston, Texas, SLB’s service portfolio includes some of the most sophisticated drilling, testing and production equipment in the industry.
Many E&P companies curtailed spending during the recession, dampening SLB’s earnings outlook. However, several quarters of higher energy prices and the discovery of large oil resources in Brazil created rising capital expenditure budgets as well as higher demand for energy services. In addition, oil and natural gas are becoming more difficult to find, leading to more complex and expensive exploratory programs and therefore an increased demand for SLB’s services. Argent anticipates that energy companies are beginning a multi-year investment cycle that will highlight the value of SLB’s industry leading services and accelerate the company’s earnings power.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.9% |
| CBS Corp. | 4.4% |
| Danaher Corp. | 3.9% |
| Suntrust Banks, Inc. | 3.8% |
| The Dow Chemical Co. | 3.7% |
| Electronic Arts, Inc. | 3.6% |
| Qualcomm Inc. | 3.6% |
| Schlumberger LTD | 3.5% |
| Oracle Corp. | 3.5% |
| Forest Laboratories | 3.4% |
U.S. Equity Indices
| Index | 05/30/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,717.2 | 0.7% | 0.8% |
| NASDAQ | 4,24.6 | 1.4% | 1.6% |
| S&P 500 | 1,923.6 | 1.2% | 4.1% |
| Russell 1000 G | 894.8 | 1.3% | 3.6% |
U.S. Credit Rates
| Index | 05/30/14 | 05/23/14 | 12/31/13 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.5% | 1.5% | 1.8% |
| 10 Year T-Note | 2.5% | 2.5% | 3.0% |
| 30 Year T-Bond | 3.3% | 3.4% | 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.
