News & Our Thinking

Weekly Investor

Weekly Investor – November 10, 2014

30 December 2014


Markets Rally!

Market Summary: 

U.S. equity markets continued to rally last week and S&P 500® Index hit a new all-time high on Friday.   The U.S. economy remains stronger than foreign counterparts and next week’s announcement of the Eurozone’s third quarter Gross Domestic Product (GDP) will be a good measure of global growth.  At home, the Republican Party won their first majority in the Senate since 2007 and unemployment fell to a four year low.  Additionally, the U.S. ISM Manufacturing Index increased to 59 for the month of October, matching the best reading since March of 2011.   Finally, third quarter earnings season has been particularly strong and earnings are on pace to have their biggest upside surprise in four years.  To date, 80% of S&P 500 members have beat earnings expectations.  Looking ahead to this week, investors hope the rally in equity markets continues.

The S&P 500® was up 0.7% for the week.  The top-performing sectors in the S&P 500® Index included Consumer Staples (2.1%) and Industrials (1.6%), while bottom-performing sectors included Consumer Discretionary (-0.1%) and Health Care (-0.5%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.3%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

Favorable Odds

MasterCard, Inc. (MA), founded in 1966, operates with its subsidiaries to provide transaction processing and additional services for its credit, deposit, and ATM programs, which reach over 24,000 financial institutions worldwide. MA facilitates the authorization, clearing, and settlement of transactions, as well as markets and develops other payment-related services. MA’s brands include MasterCard, Maestro and Cirrus.

The payment transition from cash to checks to plastic is well underway in the U.S., but is in its infancy in areas abroad. We expect MA to be a prime beneficiary of this secular change, as the company enjoys high barriers to entry, basically dividing the market with Visa, Inc. (V). The positive competitive landscape will, in our belief, protect MA’s profits in the years to come, as the company increases its saturation in developing economies. Like many companies, MA has been impacted by the slowing economy; however, it has at its disposal cost cutting options to mitigate the cyclical pressures that may weigh on its earnings. Given the company’s bright long-term growth prospects and near-term ability to protect profits, we believe MA represents favorable odds for our clients.

Top 10 Equity Holdings

Google, Inc. 5.5%
Electronic Arts, Inc. 4.1%
Danaher Corp. 3.9%
F5 Networks, Inc. 3.8%
Lincoln National 3.7%
CBS Corp. 3.7%
Broadcom Corporation 3.6%
Skyworks Solutions 3.6%
The Dow Chemical Co. 3.4%
Teva Pharmaceutical 3.4%

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.