Weekly Investor – July 7, 2014
Market Fireworks!
Market Summary:
Much like the fireworks in the sky, U.S. equities markets sparkled last week and both the Dow Jones Industrial Average and S&P 500® Index reached all-time highs. The holiday-shortened week was mostly quiet as investors closed out the second quarter of 2014 and prepared for another earnings season. The U.S. nonfarm payroll report beat expectations, adding 288,000 jobs against expectations of 215,000 and the unemployment rate decreased to 6.1%. Additionally, Federal Reserve Chairwoman Janet Yellen spoke at the International Monetary Fund (IMF) and continued to endorse a “dual-mandate” of the Fed using monetary policy to attain price stability and employment. She also indicated that she does not feel it is necessary to raise interest rates in order to lessen the risk of bubbles. However, Mrs. Yellen spoke in favor of regulations to keep risk-taking and speculation from becoming a hindrance to economic growth. Looking ahead, investors will kick off another earnings season and hope for more fireworks from Corporate America.
The S&P 500® was up 1.2% for the week. The top-performing sectors in the S&P 500® Index included Health Care (2.0%) and Consumer Discretionary (1.9%), while bottom-performing sectors included Energy (0.4%) and Utilities (-3.2%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Favorable Odds
The Allstate Corporation (ALL) engages in personal property and casualty insurance, life insurance and retirement and investment product businesses in the United States.
ALL’s current strategy is focused on return on equity (ROE) improvements. While ALL has been successful in executing its ROE strategy, we believe there is room for further improvement. Home and auto policies have increased and are approaching rate adequacy. We believe this provides ALL an opportunity to moderate price increases on policy renewal and therefore improve the renewal rate on existing policies, driving premium growth within the company. For these reasons, we have added ALL to our portfolio as we believe there is upside potential for shares of ALL to outperform.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.9% |
| CBS Corp. | 4.6% |
| Suntrust Banks, Inc. | 3.9% |
| Danaher Corp. | 3.8% |
| Schlumberger LTD | 3.8% |
| Electronic Arts Inc. | 3.7% |
| The Dow Chemical Co. | 3.6% |
| Lincoln National | 3.6% |
| Qualcomm Inc. | 3.5% |
| F5 Networks, Inc. | 3.4% |
U.S. Equity Indices
| Index | 07/03/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 17,068.7 | 1.3% | 3.0% |
| NASDAQ | 4,485.9 | 2.0% | 7.4% |
| S&P 500 | 1,985.4 | 1.2% | 7.4% |
| Russell 1000 G | 924.0 | 1.5% | 7.0% |
U.S. Credit Rates
| Index | 07/03/14 | 06/27/14 | 12/31/13 |
|---|---|---|---|
| 3 Month T-Bill | 0.1% | 0.1% | 0.1% |
| 5 Year T-Note | 1.7% | 1.6% | 1.8% |
| 10 Year T-Note | 2.6% | 2.5% | 3.0% |
| 30 Year T-Bond | 3.5% | 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.
