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May 2005 Newsletter
Sunday, May 01, 2005
"Successful investing is anticipating the anticipations of others"
- John Maynard Keynes
CANADIAN ADVANTAGE FUND
NAV: $ 13.02
MONTH CHANGE: 0.68%
YEAR TO DATE: 7.32 %
SINCE INCEPTION: 30.17%
The Van Arbor Canadian Advantage Fund concluded the month up 0.68%. The relative and absolute performance of the Fund is positive considering that the Toronto Stock Exchange's S&P/TSX composite index closed down 250 points, or 2.69% for the month. The returns since inception for the Fund and the S&P TSX benchmark are 30.17% and 14.06% respectively, creating an excess return spread over the benchmark of 16.12%. The returns year to date for the Fund and the benchmark are 7.32% and 1.47%. Over the month the Canadian markets responded to concerns regarding inflationary pressures, higher interest rates and political uncertainty overshadowing buoyant commodity prices, which normally would have supported the market. Statistics Canada reported that the annual inflation rate in March rose to 2.3% from 2.1% in February, in line with expectations. Similarly, the Bank of Canada's measure of core inflation ticked up to a nine-month high of 1.9%. Inflation data coupled with strong retail sales this week, sparked talk that the Bank of Canada may raise interest rates sooner rather than later. Over the month oil and gas related firms weakened the performance of the Fund, however positive and strong contributions were provided by more stable and growth oriented firms such as SNC Lavalin (SNC:TSX), Canadian Western Bank (CWB:TSX), Reitman's (RET/NV/A:TSX) and Home Capital Group (HCG:TSX). A single trade was triggered this month whereby the Fund sold all shares of Great-West Lifeco and with proceeds bought Russel Metals (RUS:TSX).
US ADVANTAGE FUND
NAV: $ 11.13
MONTH CHANGE: -4.52%
YEAR TO DATE: -3.54%
SINCE INCEPTION: 11.30%
The performance of the Van Arbor US Advantage Fund is reasonably in line with the general pullback of the broad US equity markets for the month of April. The Fund retracted 4.52% for the month and recorded a 3.54% loss 2005 year to date. The broad S&P 500 shed 2.01% for the month recording a 4.55% loss year to date. Since its inception, the Fund is up 11.30% while the S&P 500 is up 6.46%. With Wall Street concerned about inflation and the Federal Reserve's upcoming interest rate policy, the Commerce Department's report showing a jump in new home sales last month alleviated fears that higher rates would curtail consumers' willingness to buy homes. But a drop in consumer confidence to its lowest level in five months coupled with weak first quarter GDP growth worried investors. As a result many remained on the sidelines in the hopes that the Fed could provide clarity on the economy. The retreat in oil prices from the short-term highs helped assuage some of the pressures that have been building this earnings season as excess volatility and uncertainty in the market led many investors to seek stability and growth in the financial sector. The top performers in the Fund for the past month were banks, led by Citigroup (C:NYSE) and Golden West Financial (GDW:NYSE). Shares of Citigroup and Golden West were up 5% and 7% respectively. Manufacturers of medical and surgical products such as Stryker Corp (SYK:NYSE) and CR Bard (BCR:NYSE) resisted the market's negative sentiment and proved to be last month's defensive plays. Shares of Stryker and CR Bard ended the month up 5% and 3.5% respectively. Once again the underperformance of the oil and gas sector had a negative effect on the Fund as the portfolio composite of energy related firms lost 4% in market value. As a result of the slowing automotive industry and weaker consumer demand two transactions were triggered last month. Shares of Johnson Controls and Harley Davidson were sold and proceeds were used to purchase shares of KB Home (KBH:NYSE) and Golden West Financial (GDW: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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