The Weekly View

Week of February 25, 2013

It was an active market last week. The Italian election was the first major news of the week. Due to the inconclusive result from the election, the EU crisis hinges on the Italian election; market took a dip from the political turmoil. Although no one fears Europe to be as ugly as it was last summer; there is still a possibility of messing up in whatever they started fixing in the past few months. The Fed was already affecting the market from previous week; this week it was Bernanke himself who made the news. His testimony to Congress assured that the QE is going to go on for quite some time. Although he mentioned the dangers of QE in more detail than previously; he provided no exact timeline. Some would argue that giving a deadline for QE might trigger more economic activity than would an endless assurance of easing. On the other hand, some are seeing the benefits of QE as Bernanke exclaimed it to be. But, we saw no effect of the sequester on the market. Has the market already priced for the sequester earlier; or is it going to react as the economic effects become more visible? We shall see. Insurances are ready for a comeback An often overlooked and neglected industry within the financial sector is that of multi-line insurance. As of late, many investors have stayed away from insurance stocks due to weak investment yields and low underwriting gains. Moreover, the aftermath of the particularly turbulent 2012 hurricane season has done little to instill confidence in investors. Nevertheless, this year, the insurance industry does seem to be demonstrating some rather encouraging signs. This time around, insurance companies are better prepared and more apt to handle significant losses that will be incurred as a result of natural disasters. Moreover, the consequences resulting from natural disasters have more people turning toward and accepting more expensive insurance for coverage. Additionally, the industry has generally been seeing overall pricing increases as of late, indicating some potential growth and recovery in insurance. All of these trends serve as support for those thoroughly considering investing in insurance to further diversify their profiles. For an investment in the insurance industry, one stock I would recommend would be Allstate Corporation (NYSE: ALL). Allstate is a prominent insurance agency that commonly deals with the provision of personal property and casualty insurance, life insurance, and retirement and investment products. Over the course of the last year, Allstate has experienced continuously solid growth, and there are no signs that seem to indicate an upcoming change in this trend. For those interested in the insurance industry, Allstate would be a very sensible choice from which to start. Heavy machinery sales point to growth The industrials sector has remained stable this past week, increasing by 1.14% over the last five days. Following last weeks excitement of mergers, very little has occurred. The Dow Jones Transportation Average is similarly consistent, fluctuating between 5,800 and 6,000. Meanwhile, the S&P 500, also closely correlated with the industrials sector, is currently around 1,520. On Tuesday, the Commerce Department reported that orders for capital goods, such as construction equipment and industrial machinery, increased by 6.3% in January. Businesses are again beginning to look at investing in themselves and expanding in 2013. Similarly, construction spending in 2012 totaled $850 billion, 9.2% higher than spending in 2011. Such increases are positive indicators for

Drexel Finance and Investment Group; Weekly View of February 25, 2013 manufacturing companies in the industrials sector. A stock to watch is Document Security Systems (NYSE: DSS), a developer and producer of technologies focused on fraud and forgery prevention. Recently, the firm has been testing an authentication application for digital devices such as iPhones. As the use of mobile phones for important business becomes more prevalent, the demand for such software will increase. The stock, trading around $2.50 a share, rose by nearly 10% Friday. VVUS was big in the news last year with the launch of a new weight loss drug. Weight loss drugs seem like a great investment in the current situation of US society. But, VIVUS as an upcoming future star failed to be one of the pioneering forces in the weight loss drug market. The sales figure for Qsymia was half of the reduced estimate. And to top that, estimates are that they are going to suffer with their new erectile dysfunction drug too. Stendra was approved by FDA just last year and it is going up against competitors like Viagra from Pfeizer (PFE), Levitra by Bayer (BAX) and GlaxoSmithKline (GSK). Then there is also Cialis from Lilly (LLY). Last week, VVUS lost 18.45% of its value on the back of disastrous Qsymia sales; and the outlook seems grim. One of the rising stars of pharmaceuticals in the last year lost all their growth from last year. It just shows once again that Pharmaceuticals is still a player in large cap field. Even if a mid or small gains momentum, they are falling of the train badly.

Pharmaceuticals, controlled by big caps The volatile market edged a little up by the end of the volatile week. The healthcare industry, which has been moving along the same line as the market in recent times, was actually down by the end of the week. S&P Healthcare Services Select is down by almost 0.7% while Pharmaceuticals are down by 0.3%. One of the biggest disappointments of the week was VIVUS (VVUS).

Drexel Finance and Investment Group; Weekly View of February 25, 2013 The week of March 04, 2013 As a new month starts, we should see a lot of economic data coming in. But, it is likely that Italian situation will still hold a large portion of market moving news. The question is whether they have to go into a new election; or will a grand coalition be formed? Whatever happens, it is likely to be messy. The non-manufacturing ISM report will come out Tuesday; it will show us the situation of the larger portion of US economy. We will have the Fed Beige book on Wednesday and see which portion of the country is driving growth and who are the ones suffering. Weekly jobless claims report will come out on Thursday; the forecast shows a rise in claims. US productivity report for the last quarter is due on March 7th. It should be interesting to see where US stands on one of the biggest growth drivers. There is also a report on household debt for fourth quarter due the same day. This has been the developing indicator that will pave the way for future consumption. Another big indicator due to come out is the manufacturing payroll for February. Due on Friday, it will show growth activity and possibilities in manufacturing. The unemployment rate is also due to be published on Friday.

Contributors: Insurances are ready for a comeback Vincent Laudicina Heavy machinery sales point to growth Jeffrey Herr Pharmaceuticals, controlled by big caps Tafhimul Huda

Director: Maureen Gribb Editor: Tafhimul Huda Assistant Editor: Phillip Nabedrik