Weekly Investor – December 22, 2014
A Whipsaw Week
U.S. equity markets ended in positive territory after a whipsaw week. Stocks plunged nearly 1.5% on Monday and Tuesday only to surge approximately 5% later in the week. In fact, markets soared on Wednesday and the S&P 500® Index increased over 2%, marking the largest one day rally since 2013. The CBOE S&P Volatility index reached 23.5 on Tuesday, its highest level since mid-October, but fell to 16.4 on Friday as equity markets rebounded. Additionally, investors remained focused on the price of oil as it seemed to stabilize mid-week, posting the first two day rally since November. As investors prepare to close out the year in two upcoming holiday-shortened weeks, the U.S. continues to project solid GDP growth, strong labor markets, strong corporate profits and an accommodative bank.
The S&P 500® was up 3.4% for the week. The top-performing sectors in the S&P 500® Index included Energy (9.7%) and Basic Materials (5.0%), while bottom-performing sectors included Consumer Staples (2.1%) and Consumer Discretionary (1.7%). In the fixed-income market, the 10-year Treasury yield was up during the week, ending at 2.2%.
We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.
Growth 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 newly promoted 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. | 5.0% |
| Electronic Arts, Inc. | 4.6% |
| Skyworks Solutions | 4.2% |
| Danaher Corp. | 4.0% |
| F5 Networks, Inc. | 3.8% |
| CBS Corp. | 3.8% |
| Lincoln National | 3.8% |
| Broadcom Corporation | 3.7% |
| EMC Corporation | 3.3% |
| Teva Pharmaceutical | 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.
