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March 2005 Newsletter
Tuesday, March 01, 2005
"I know at last what distinguishes man from animals; financial worries."
- Romain Rolland
CANADIAN ADVANTAGE FUND
NAV: $ 13.16
MONTH CHANGE: 5.54%
The Fund has been established and running for three quarters and has enjoyed superior performance on an absolute and relative basis. For the month of February, the Van Arbor Canadian Advantage Fund was up 5.54%, 8.5% year to date, and 31.6% since its inception. In market news, Canadian stocks surged to their highest level in more than four years, last month, as strong earnings from the country's biggest banks helped rally the market. The Toronto Stock Exchange's S&P/TSX composite index was up 5% for the month fueled by promising earnings reports and higher oil prices. At the close of February, the market was at levels not seen since November 2000. While U.S. rates are still seen on the increase, analysts expect the Bank of Canada will leave its overnight rate steady until the second half of the year. Numerous sectors and companies positively contributed to the Fund's performance this month. Not surprisingly energy related stocks dominated all other sectors, contributing an average return of 19% for the month. Shares of Talisman Energy (TLM:TSX), Suncor Energy (SU:TSX), and Imperial Oil (IMO:TSX) gained the most over the month contributing 17%, 19.8% and 21% respectively. The financial sector of the Fund only had one bank report its earnings last month. Shares of National Bank (NA:TSX) appreciated more than 8.7% last month after the company announced a 28% increase in first quarter profits; the bank's earnings were 37% above analyst's expectations for the quarter. Late in the month Finning was sold to purchase shares of Russel Metals (RUS:TSX), a distributor of steel in North America.
US ADVANTAGE FUND
NAV: $12.13
MONTH CHANGE: 4.42%
The Van Arbor US Advantage Fund had a strong February generating a 4.42% return for the month, 5.1% year to date and 21.35% return since its inception. Stronger-than-expected growth in the US gross domestic product pushed stocks higher in the latter stage of February as investors welcomed the benefits of an improving economy and looked past the possibility of higher inflation. Investors were generally pleased with the latest GDP data, which showed the economy growing at an annualized rate of 3.8 percent in the fourth quarter, up from last month's 3.1% estimate from the Commerce Department and better than economists' 3.5% forecast. With crude oil futures trading at above $50 a barrel on the New York Mercantile Exchange last month, some analysts and investors remained concerned that stronger economic growth would lead to faster and more aggressive interest rate hikes from the Federal Reserve to combat inflation. Broader stock indicators were moderately higher for the month. The Standard & Poor's 500 Index was up 1.4%, while the Dow Jones Industrial Average gained 2.3%. While fears of inflation and lower profit margins due to higher oil costs continue to hurt the majority of the blue-chip companies listed in the indexes, the Funds 15% exposure to the oil & gas sector helped offset the market trend. The oil and gas related firms in the Fund were up 15.3% for the month on average, with the leader being the stock of Exxon Mobil, which was up 22%. While the Fund's exposure to the real estate development sector is quite small, the second largest gain over the month was delivered by Pulte Homes (PHM:NYSE). Pulte, currently the second biggest developer and marketer of homes in US, contributed a 19.5% to the overall fund performance for the month. No changes in the portfolio holdings occurred during the month.
Additionally the partners and employees of Van Arbor would like to thank all clients and prospective clients that showed up to celebrate our One Year Anniversary last month. Please visit our new and improved website at ww.vanarbor.com.
Please also note the following change in Canadian tax laws. Federal government presented a budget last week that scrapped the limit on foreign investments in registered individual retirement savings accounts. Before the budget measure, the limit on foreign investments in Canada's Registered Retirement Savings Plans was 30 percent of the plan's value.
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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