News & Our Thinking

Weekly Investor

Weekly Investor – July 28, 2014

31 July 2014


Positive Earnings Reports

Market Summary: 

U.S. equity markets ended the week mixed and the S&P 500® Index closed even at 0.01%.  Ongoing worry over tensions in Ukraine and the Middle East weighed heavily on investors as potential sanctions are of concern.  However, positive economic news and earnings balanced out issues abroad.  In fact, the S&P 500 reached record highs on both Wednesday and Thursday after positive earnings reports.  Of the 33 companies in the S&P 500® to report earnings on Tuesday evening, only three did not meet or beat expectations.    Additionally, June existing homes sales rose above expectations and U.S. initial jobless claims decreased from the previous week and came in below consensus estimates.  Looking forward, investors hope for more positive from Corporate America.

The S&P 500® was up 0.01% for the week.  The top-performing sectors in the S&P 500® Index included Energy (0.8%) and Technology (0.7%), while bottom-performing sectors included Industrials (-0.9%) and Consumer Discretionary (-1.0%). 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.

Favorable Odds

CHKChesapeake Energy Corp. (CHK) engages in the acquisition, exploration, development and production of natural gas and oil properties in the United States.   CHK was founded in 1989 and is headquartered in Oklahoma City, Oklahoma.

CHK is one of the largest leaseholders of natural gas acreage in the United States.  Previously, the company earned well below its cost of capital but recently changed its compensation structure to focus on improving its return on invested capital (ROIC) and cash flow.  These changes are the result of a new CEO and executive management team focused on reducing costs by drilling only on their best acreage.  We believe the new changes have the potential to significantly increase earnings and therefore offer favorable odds to our clients.

Top 10 Equity Holdings

Google, Inc. 6.0%
CBS Corp. 4.2%
Suntrust Banks, Inc. 3.8%
The Dow Chemical Co. 3.7%
Danaher Corp. 3.7%
Schlumberger LTD 3.7%
Electronic Arts, Inc. 3.6%
Lincoln National 3.6%
F5 Networks, Inc. 3.4%
Gannett Co., Inc. 3.4%

U.S. Equity Indices

Index 07/25/14 Week % Chg YTD % Chg
DJIA 16,960.6 -0.8% 2.3%
NASDAQ 4,449.6 0.4% 6.5%
S&P 500 1,978.3 0.0% 7.0%
Russell 1000 G 916.4 0.1% 6.1%

U.S. Credit Rates

Index 07/25/14 07/18/14 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 2.5% 2.5% 3.0%
30 Year T-Bond 3.2% 3.3% 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.