Weekly Investor – June 16, 2014
Disappointing Economic Data
Market Summary:
U.S. equities pulled back last week and the S&P 500® Index lost 0.84% from its all-time closing high of 1,951.27 reached earlier in the month. However, year-to-date the S&P 500 has returned 5.75%. Disappointing U.S. economic data contributed to the downturn as May Retail Sales fell below expectations, advancing only 0.3% from April and initial jobless claims came in at 317,000 versus expectations of 310,000. Additionally, the University of Michigan’s consumer confidence survey showed a slight weakness, coming in at 81.2 against expectations of 83. In stock news, pharmaceutical maker Valeant, once again saw their offer for rival Allergan rejected. This is Valeant’s third unsuccessful bid for the company. Looking ahead to this week, investors will await any news from the Federal Reserve’s scheduled meeting and hope for positive news from Corporate America.
The S&P 500® was down 0.7% for the week. The top-performing sectors in the S&P 500® Index included Energy (1.7%) and Technology (-0.1%), while bottom-performing sectors included Industrials (-1.4%) and Consumer Discretionary (-1.7%). In the fixed-income market, the 10-year Treasury yield was even during the week, ending at 2.6%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Upside Potential
SunTrust Banks, Inc. (STI) was founded in 1891 and is headquartered in Atlanta, Georgia. STI provides various financial services within the United States. Historically, STI has been a solid, southeast regional bank. However, since 2008 the severe housing bubble in Florida combined with the global financial crisis has put significant earnings and capital pressure on STI.
STI’s new CEO, Bill Rogers, is committed to lowering cost and rebuilding STI’s business. In Argent’s view, the current depressed valuation of STI is due to the expectation of a relatively slow recovery and worries over the company’s exposure to older and troubled mortgages. Therefore, we believe STI’s upside potential is substantial as the company works to return to a solid, healthy regional bank within the next few years and offers favorable odds for our clients.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.7% |
| CBS Corp. | 4.4% |
| Danaher Corp. | 4.0% |
| Suntrust Banks, Inc. | 3.9% |
| The Dow Chemical Co. | 3.7% |
| Electronic Arts, Inc. | 3.7% |
| Schlumberger LTD | 3.6% |
| Qualcomm | 3.5% |
| Lincoln National | 3.5% |
| Oracle Corp. | 3.4% |
U.S. Equity Indices
| Index | 06/13/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,775.7 | -0.9% | 1.2% |
| NASDAQ | 4,310.7 | -0.2% | 3.2% |
| S&P 500 | 1,936.2 | -0.7% | 4.8% |
| Russell 1000 G | 897.3 | -1.0% | 3.9% |
U.S. Credit Rates
| Index | 06/13/14 | 06/06/14 | 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% | 2.6% | 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.
