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December 2005 Newsletter
Thursday, December 01, 2005
MONTHLY UPDATE
As the 2005 year winds down, we want to wish our clients and families Happy Holidays. We have chosen this year not to send out Christmas cards, instead we will be making a donation to the Empty Stocking Fund. Now in its 85th year, the Empty Stocking Fund is a fundraising initiative of The Province newspaper that is designed to increase awareness and to raise money for the thousands of children and families in need each year at Christmas time.
As we are fast approaching our second year-end and the start of the RRSP season, we are organizing one-on-one meetings with unit holders and investment dealers to discuss the three Funds on offer and Portfolio strategies. If you have not been contacted, and would like to set up a meeting please contact John Bear at 604.895.7138 or Steve Hanson at 604.895.7126.
Also, a research study of the Accredited Investors Purchase Exemption by the BCSC is currently in progress with financial service providers across the province. The study includes the BCSC contacting a number of Accredited Investors, and it is possible that a few of our unit holders may be contacted.
Happy New Year and thank you once again for your continued interest in Van Arbor and our funds.
CANADIAN ADVANTAGE FUND
The Van Arbor Canadian Advantage Fund ended the month up 5.14% and is up 29.69% year-to-date. With 11 of 12 months behind us, Globefund has ranked the Canadian Advantage Fund as #1 for performance year-to-date out of 257 funds in its asset class. Canadian equity markets posted strong gains for the month of November as the S&P TSX Index was up 4.25% to close at 10,824. The November rally was propelled by financials, materials and utilities which were up 6.73%, 7.48% and 6.86% respectively. While the Fund's energy holdings continued their positive contribution, it was the financials and metals that were the driving force behind last month's solid gains. Shares of financials, like IGM Financial (IGM:TSX) and Royal Bank (RY:TSX) appreciated 8.10% and 6.80%, while Russel Metals (RUS:TSX), and Fortis Inc (TSX:TSX) recorded total returns of 12.50% and 14.00% respectfully. Of our 20 holdings, only 3 companies ended the month in red, including the Ontario based food retailer, Loblaw Cos (L:TSX). The latter part of the month also witnessed a change in the dividend tax policy. The Globe and Mail reported that the government's proposal, which is scheduled to take effect in 2006, will effectively drop personal tax rates on dividends to roughly 21% (for the highest marginal rate) from their current 32%. As a result of the announcement by the federal Finance Department a rally was seen in high dividend paying stocks, like the big banks, utilities and pipelines. The Canadian Fund was no exception to the tax-break stimulated rally, as 19 of our current holdings pay dividends and out of these 9 have dividend yields higher than that of the S&P TSX Index (dividend yield refers to what a company pays out to its shareholders in the form of dividends. It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock's price - for more information on your Canadian portfolio's summary statistics, such as dividend yields, please visit http://www.vanarbor.com/i/pdf/CDNFactSheet.pdf ). The Fund has sold its holdings of Encana and has replaced it with Canadian Tire Ltd (CTR.NV:TSX).
US ADVANTAGE FUND
The US market's long overdue rally took place this past month as the Christmas shopping season officially kicked off and consumers stormed the hungry retail outfitters. The S&P 500 Index advanced 3.52% this November to close at 1,249, a high not seen since the early summer of 2001. The US Advantage Fund was up 3.95% and was recorded by Globefund's US Equity class as a top quartile performer for the year-to-date returns. Financials and retailers were the driving force of the Fund this November as shares of Golden West Financial (GDW:NYSE) advanced 10.50%, while shares of McGraw Hill (MHP:NYSE) jumped 8.75% for the month. The late year rally, while a deja-vu of last year's November spike, is currently a result of the recent wave of optimism regarding the direction of the US economy. The US economy has been surprisingly resilient this year and is expected to grow by 3.6% in 2005 despite the recent difficulties posed by both oil prices and hurricanes - the latter cutting 0.5% from growth on an annual basis in the second half of the year, as reported by OECD. There were no portfolio trades for the month.
EURO ADVANTAGE FUND
The Van Arbor Euro Advantage Fund concluded the month of November down 1.36% while the benchmark European index, S&P Euro, recorded gains of 0.96% in Canadian dollars. Since its inception in August 2005, the Fund recorded positive equity gains (denominated in Euros), however due to the rally in the Canadian dollar against the Euro, the portfolio (as the NAV is denominated in Canadian dollars) has recorded a loss of 4.04%. While there has been short term volatility in the foreign exchange (CAD v. EUR), we believe that over the long run hedging the exchange rate will only result in additional costs to the Fund and will provide little benefit for the long-term investor. The S&P Euro benchmark closed at 1,864 in November, marking a new 3 1/2 year high for the Index. Strong returns for the month were recorded by numerous retailers in the portfolio like Continental AG (CON.GR) and Boehler-Uddeholm (BUD.AV), as the two were up 12.85% and 9.50% respectively. Financials led by Anglo Irish Bank Corp (ANGL.ID) also finished the month strongly and recorded average returns of 3.20%, while the group of financials found in the S&P Euro Index were up 6.26%. While 17 out of the 20 stocks in the portfolio finished in positive territory, the currency loss of 3.03% was the culprit for November's returns. There were no portfolio trades this past month.
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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