Weekly Investor – June 23, 2014
Equities Soar
Market Summary:
U.S. equities markets soared last week and both the Dow Jones Industrial Average and S&P 500® Index closed the week at all-time highs on Friday. The momentum was driven by the Federal Reserve after it reported that economic growth is returning and reiterated that rates would remain low for a prolonged period of time. The Fed’s comments were further confirmed on Thursday when U.S. economic leading indicators rose for the fourth consecutive month. Despite the positive equity market news, geopolitical risk in Iraq weighed heavily on investors. On Thursday, President Obama stated that he will send as many as 300 military advisors to assist the Iraqi army, but limited the options for more involved military assistance. Looking ahead to this week, investors hope for continued momentum as they prepare to close out the first half of 2014.
The S&P 500® was up 1.4% for the week. The top-performing sectors in the S&P 500® Index included Utilities (3.0%) and Energy (2.7%), while bottom-performing sectors included Telecommunications (0.7%) and Technology (0.2%). 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
United Parcel Service, Inc. (UPS) is a package delivery company which provides transportation, logistics and financial services in the United States and internationally. It operates in three segments: U.S. Domestic Package, International Package and Supply Chain and Freight.
We believe UPS has solid pricing power as the company just raised its shipping rates by approximately 5%. Shipments to Europe account for about 25% of current revenues and are beginning to rise as the European economy continues to improve. Additionally, the secular shift to online shopping is finally reaching critical mass, resulting in margin growth for UPS. Finally, UPS generates strong free cash flow which enables the company to return a substantial amount of cash to shareholders in the form of a solid dividend yield and consistent stock buy backs. For these reasons we have added UPS to our portfolio as we believe it offers favorable odds.
Top 10 Equity Holdings
| . | |
|---|---|
| Google, Inc. | 5.7% |
| CBS Corp. | 4.3% |
| Danaher Corp. | 4.0% |
| Suntrust Banks, Inc. | 3.9% |
| Electronic Arts., Inc. | 3.8% |
| The Dow Chemical Co. | 3.7% |
| Schlumberger LTD | 3.6% |
| Lincoln National | 3.6% |
| Qualcomm Inc. | 3.5% |
| Forest Laboratories | 3.4% |
U.S. Equity Indices
| Index | 06/20/14 | Week % Chg | YTD % Chg |
|---|---|---|---|
| DJIA | 16,947.1 | 1.0% | 2.2% |
| NASDAQ | 4,368.0 | 1.3% | 4.6% |
| S&P 500 | 1,962.9 | 1.4% | 6.2% |
| Russell 1000 G | 907.9 | 1.2% | 5.1% |
U.S. Credit Rates
| Index | 06/20/14 | 06/13/14 | 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% | 2.6% | 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.
