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February 2005 Newsletter
Tuesday, February 01, 2005
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute."
- William Feather
CANADIAN ADVANTAGE FUND
NAV: $12.468
MONTH CHANGE: 2.79%
The Van Arbor Canadian Advantage Fund commences the New Year with strong, positive results. For the month of January, the Fund contributed a 2.79% return to the overall 24.68% performance since its inception. In relation to the S&P TSX Index, the Fund exceeded the performance of the Index by 3.2% for the month of January and by 12.18% since the Fund's inception. In market news, the Bank of Canada said recent data suggests that growth in the fourth quarter of 2004 was marginally weaker than previously expected, due partly to a somewhat more pronounced economic adjustment to the past appreciation of the Canadian dollar. Canadian central bank met market expectations late this month and maintained its overnight rate at 2.50%, causing the Canadian dollar to plunge to a one month low versus the greenback. Year to date, the top performers in the Canadian portfolio were Oil and Gas related companies, which contributed an average return of 5.1%. The leaders in the group were Talisman Energy (TLM:TSX) and Imperial Oil (IMO:TSX), contributing 15.8% and 10.3% respectively. Imperial Oil, Canada's largest oil company, recently reported a fourth quarter profit increase of 68%, claiming that production increases coupled with rising energy and chemical prices helped the company generate the highest net income in its history. Pipelines and transporters of oil also advanced this month led by Enbridge Inc (ENB:TSX), which appreciated by 6.8%. Enbridge, Canada's second biggest pipeline company, said fourth quarter profit rose almost fourfold as the company shifted to a new fiscal year and fuel demand boosted volume. On a continuing basis, earnings per share of Enbridge for the quarter were up 34%. Early in the month Mullen Transportation was sold to purchase shares of Bank of Nova Scotia (BNS:TSX), which currently is one of the largest Canadian banks by market capitalization.
US ADVANTAGE FUND
NAV: $11.621
MONTH CHANGE: 0.70%
The Van Arbor US Advantage Fund continues to display positive growth for the month contributing 0.70% to the overall 16.21% performance since its inception. The broad equity market indexes as represented by the S&P 500 and Dow Jones Industrial Average (DJIA) pulled back early and late this month giving back most of December's gains. The Fund's excess performance, since its inception, over the S&P500 and DJIA materialized to 6.8% and 10.6% as of this month's end. Midway through the earnings report season the S&P 500 released that the share weighted percentage change in earnings for the 237 companies that reported was 16.6%, compared to the same time last year when the S&P reported an earnings increase of 31.5%. Disappointing guidance from companies for 2005, fear of higher interest rates, higher oil prices and worries about the large U.S. trade and budget deficits have clearly resurfaced as broader equity market concerns. Fueled by higher oil prices and exceptional earnings, the top performers in the US portfolio were no other than Oil and Gas related firms, which as a group appreciated 8.9% for the month. Amongst the leaders were Apache Corp. (APA:NYSE), a US oil and natural gas producer and Murphy Oil (MUR:NYSE). Apache recently reported a doubling of fourth quarter profit as a result of record production and higher sales prices and for the month was up 8.9%. The best performing stock for the month was Alberto Culver (ACV:NYSE), a manufacturer and international distributor of personal care products. The company announced record sales and profits for the new fiscal year's first quarter, stating that the two increased 10.8% and 21.2% respectively. Stock of Alberto Culver appreciated 9.2% for the month. Two sales were triggered this month: Sallie Mae (SLM:NYSE) and Anheuser-Busch (BUD:NYSE) were sold and replaced by Bank of America Corp (BAC:NYSE) and Apache Corp. (APA:NYSE).
Van Arbor Asset Management is an independent Asset Management company dedicated to creating wealth using a disciplined, proprietary investment strategy with an emphasis on preserving capital while generating superior long-term returns.
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