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August 2005 Newsletter
Monday, August 01, 2005
CANADIAN ADVANTAGE FUND
The Canadian equity markets made a hefty advance over the month of July suppressing any beliefs that stock markets usually and quietly trend sideways over the summer months. The broad market as represented by the S&P TSX Index advanced 5.25% for the month recording its biggest single month gain since November 2001 when the Index advanced 7.84%. Keeping in mind that the average monthly gain over the last 5 years for the Index has only been 0.10%, this month's stunning display of positive results has been the driving force behind the Index's 12.72% return 2005 year to date. Furthermore, the drive in the Canadian equity markets was not solely a result of advances captured by energy related stocks. While the TSX Energy Index was up 8.50% for the month, financials, industrials, and materials were also ahead of the game posting monthly gains of 4.31%, 9.12% and 5.64% respectively. The Canadian Advantage Fund responded most positively to holdings of financials this month, as the average gain of bank and insurance related stocks in the portfolio was over 5.6%. Once again for the month of July the fund exceeded the return of the S&P TSX and captured a surplus of 1.08% against the benchmark. There were no portfolio trades this month.
US ADVANTAGE FUND
The US equity market, as represented by the broad S&P 500 Index, rebounded during the month of July recording its highest single month gain for 2005. Buoyed by rising U.S. consumers' confidence, and positive earnings announcements, the US market continues to battle for positive growth year to date. Following the closely watched Monetary Policy Report, small changes were made to 2005 growth and inflation forecasts - revising the former down slightly and the latter up a bit. However, Chairman Greenspan remarked that the baseline outlook "is one of sustained economic growth and contained inflation pressures", requiring the Fed "to continue to remove monetary accommodation", and thus continue to raise short-term rates. The US Advantage Fund responded positively to the general market upturn and captured a gain for the month. The positive performance was led by home builders, as shares of Pulte Homes (PHM:NYSE) and KB Homes (KBH:NYSE) appreciated 11.35% and 7.80% respectively. Over the month however, the portfolio did experience a minor pullback in financials due to slower growth in investment banking revenues and losses on the fixed income front. Shares of Citigroup (C:NYSE) and Legg Mason (LM:NYSE), the best performer year to date, were sent down a few percent for the month. Three trades were triggered early in the month. Holdings of Ball Corp, McCormick & Co and Dentsply were sold and proceeds were used to purchase Newfield Exploration (NFX:NYSE), Johnson & Johnson (JNJ:NYSE), and McGraw-Hill (MHP: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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