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May 2007 Newsletter
Tuesday, May 01, 2007
CANADIAN ADVANTAGE FUND
The Canadian Advantage Fund had a strong performance this month, advancing 4.16% to close at $18.83. The fund outperformed the S&P TSX Index by 2.44%. The Canadian equity market continues to show strength, with corporate takeovers and acquisitions fuelling the S&P TSX Index to a new record level. GDP growth rebounded from last quarter, which helped push the Canadian dollar to a seven month high against the US dollar. Global consolidation of companies continues, with more attention being given to Canada's favourable business climate. Strong domestic demand as well as well-run companies has led to record merger and acquisition activity in Canada. Talks of a buyout of BCE helped lift the telecommunications sector 12.1%. The mining sector saw more takeovers this month with Dynatec being acquired by nickel producer Sherritt, who is attempting to capitalize on record nickel prices by increasing their productive output.
The energy and industrial sectors also had a strong month with gains of 4.2% and 6.9% respectively. Shares of Laperrière & Verreault Inc (GLV/A:TSX) soared 35.8% this month as they sold their mineral processing division to Danish company FLSmidth for $950 million. Our newly established position in Cameco Corp (CCO:TSX) rose 9.3% this month. The Canadian company is the world's largest uranium miner and expects to gain from increasing global nuclear energy demand as well as high prices due the limited supply of uranium. This month saw shares of SNC Lavelin (SNC:TSX) and Suncor Energy (SU:CN) sold while positions were made in Brookfield Asset Management (BAM/A:TSX) and Power Corp (POW:TSX).
Fund Performance Summary (Benchmark is S&P TSX Index)
US ADVANTAGE FUND
The Van Arbor US Advantage Fund had a solid performance rising 2.95% for the month to close at $13.19. US equity markets also saw record levels reached this month as corporate earnings came in much better than expected. Strong earnings reports from Johnson & Johnson and Caterpillar helped lift the Dow Jones Industrial Index to over 13,000 for the first time. Corporate earnings remain at healthy levels as consumer spending continues to drive the US economy. The strength of the job market has led to incomes' rising which correspondingly is helping support domestic demand.
The US dollar fell to its lowest level against the Euro, helping exporters increase demand for their goods. Shares of Insurer Aflac Inc (AFL:NYSE) rose 9.1% as the company reported first quarterly earnings that were 13.5% higher than last quarter. Some of the biggest winners this month were Johnson & Johnson (JNJ:NYSE) and Constellation Brands (STZ:NYSE) which saw shares appreciate 6.1% and 8.1% respectively. The US fund saw no trades this month.
Fund Performance Summary (Benchmark is S&P 500 Index)
EURO ADVANTAGE FUND
The Van Arbor Euro Advantage Fund ended the month up 1.42% to close at $12.25. European equity markets once again had another positive month with the S&P Euro Index reaching a new record high. The Euro Zone continues to attract domestic and foreign investors as their economy shows no sign of slowing down. Much of the worries of a US slowdown have been counteracted by strong demand from Asia and Russia.
The Euro currency has not appreciated as much against other currencies as it has against the US dollar. This has helped maintain increases in export demand from Europe's growing neighbors. Most of Europe's fastest growing export markets remain in the east with Russia and Turkey increasing export demand by over 20%. Germany continues to lead the way in the Euro zone, with German industrials providing much of the output for the increased demand. Most sectors saw strong monthly gains, with the financial and industrial sectors rising 5.9% and 6.5% respectively. Shares of construction machinery and equipment provider Ramirent Oyj rose 23.2% with earnings increasing by over 100% for the second consecutive year. German machinery production manufacturer Krones Ag rose 11.4% as advances in productivity and business processes helped lift earnings and sales growth by 18.4% and 14% respectively. This month saw shares of ENI SpA sold while a position in Anglo Irish Bank was established.
Fund Performance Summary (Benchmark is S&P Euro Index)
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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