November 2009 Newsletter
November 1st, 2009
CANADIAN ADVANTAGE FUND
The Canadian Fund finished slightly positive for the month of October, while the TSX Index fell 4.25%, an indication that it remains a stock picker’s market. Financials, industrials, and cyclical companies were the largest drag on the index as recovery optimism waned a bit. Earnings reports were mixed with bottom line profits improving but top line sales disappointing. Economic data continues to confirm a cyclical rebound is in the works; however, the magnitude of economic growth is uncertain as we transition from government spending led growth to private sector led growth. Not all areas of the market were weak in October, as previously ignored non-cyclical areas of the market, which we have been transitioning into, regained some attention with strong earnings reports and actual sales growth. Some of our biggest winners last month were Maple Leaf Foods (+18%) and Rogers Communications (+5%), both of which reported better than expected quarterly earnings. We expect the next few months to remain a stock picker’s market with company and sector selectivity driving absolute and relative gains for the Fund.
WORLD ADVANTAGE FUND
The World Fund managed to stay positive in October, with a gain of 0.23%, while the MSCI World Index fell 1.37%. Some volatility returned to markets towards the end of the month as currency fluctuations along with mixed earnings reports led the market to give up earlier monthly gains. One of the biggest drivers of the recent market run up has been the weak US dollar, which showed some signs of life recently. Many areas of the market have benefited from the weaker US dollar and may be at risk of a pullback if the US dollar were to strengthen. There are many opportunities in areas of the market that are unaffected by currency volatility but are under represented in major indices. As some of the hotter sectors cool down, we expect attention to once again return to some great “boring” companies like US grocer Safeway, US utility Exelon, and Japanese utility Tokyo Gas Co. Our attention is also focused on the strength of the Canadian dollar, which has given the Fund an opportunity to buy foreign equities at discounted prices.
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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