Weekly Investor – May 5, 2014
Fed Tapering Continues
Market Summary:
U.S. equity markets ended the week with gains and the S&P 500® Index closed with a 1% return. Monday was mixed with positive home sales data but weakness within financial and material stocks. Tuesday, strong earnings reports boosted markets and Wednesday’s announcement by the Federal Open Market Committee (FOMC) also increased equity market gains. The FOMC stated that they are further reducing monthly bond purchases by $10 billion to $45 billion, which was an expected and welcome change. On Thursday, markets gave back some previous gains as U.S. initial jobless claims came in at 344k, higher than consensus estimates of 320k. Looking ahead to this week, investors continue to pay attention to earnings reports for more good news from Corporate America.
The S&P 500® was up 1.0% for the week. The top-performing sectors in the S&P 500® Index included Telecommunications (2.8%) and Technology (1.7%), while bottom-performing sectors included Industrials (0.6%) and Utilities (-1.4%). 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.
Growth Potential
Post Holdings, Inc. (POST) engages in the manufacture, marketing, and distribution of branded ready-to-eat cereals in the United States and Canada. The company was founded in 1897 and is based in St. Louis, Missouri.
POST previously operated as a subsidiary of Ralcorp Holdings Inc. (RAH), a current Argent holding. However, as of February 2012, POST was spun off from RAH to operate independently as part of a value creating plan to maximize value for shareholders. We approve of the plan and think highly of POST’s current management team and their ability to drive value creation for shareholders. Additionally, POST is the number three player among branded cereal companies and possesses strong brands and impressive cash flow generation. While turn-around efforts will certainly take time, we believe increasing POST’s position within our portfolio creates favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.7% |
| CBS Corp. | 4.4% |
| SunTrust Banks, Inc. | 3.9% |
| Danaher Corp. | 3.8% |
| Qualcomm, Inc. | 3.6% |
| The Dow Chemical Co. | 3.6% |
| Lincoln National | 3.5% |
| Schlumberger LTD | 3.5% |
| Quanta Services, Inc. | 3.5% |
| Oracle Corp. | 3.5% |
U.S. Equity Indices
| Index | 05/2/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,512.9 | 0.9% | -0.4% |
| NASDAQ | 4,123.9 | 1.2% | -1.3% |
| S&P 500 | 1,881.1 | 1.0% | 1.8% |
| Russell 1000 G | 869.9 | 1.3% | 0.7% |
U.S. Credit Rates
| Index | 05/02/14 | 04/25/14 | 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 | 2.6% | 2.7% | 3.0% |
| 30 Year T-Bond | 3.4% | 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.
