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December 2009 Newsletter

December 1st, 2009

CANADIAN ADVANTAGE FUND

November was another steady month for the Canadian Fund, gaining 2.2% and making it the ninth consecutive positive monthly return. The S&P; TSX Index just recouped October’s losses, rising 4.9% for the month. Most of the market attention last month was on the materials sector, especially gold which continues to defy gravity. Given that gold is not consumed nor has any economic usefulness other than being an alternative currency, we remain skeptical of its current value as an investment relative to other areas of the market which have more solid “real” foundations. Lost in the glitter last month, was the exceptional earnings reports from Canada’s food sector, which although is a small part of the market, is increasingly becoming a larger portion of our portfolio. Grocers in general showed that food demand is steadily increasing while price competition remains even. Some of our biggest winner’s last month were grocers Loblaw’s (+10.8%) and Metro (+7.6%), both of which delivered solid earnings with visible improving fundamentals. Even as the market has flattened out since September, we continue to see a stock picker’s market with select value opportunities plentiful outside the attention grabbing index movers.

WORLD ADVANTAGE FUND

The World Fund had a steady month as well, rising 0.4%, while the MSCI Index bounced back by 1.9%. A decent month for the Fund, considering the Canadian Dollar’s 2% strength versus most foreign currencies. With the US Dollar stabilizing at a 12 month low versus the Loonie, we believe the sale in foreign equities remains an attractive opportunity for most Canadians to capitalize on our popularity in the foreign exchange market. Of course, the US is not the only area with select opportunities, as Japan has piqued our interest along with Hong Kong. In particular, those Asian country’s utilities look very attractive going into 2010, with very nice dividend yields, better economic production/electricity demand prospects, as well as sitting at multi decade low valuations. Our biggest winners in November were Japanese utility Kansai Electric (+9.9%) as well as international retailer Wal-Mart (+9.8%), which continues to grab market share from retailers around the World. This will likely be a common theme next year, with quality companies in less cyclical areas of the economy regaining earnings momentum and thus offering better capital appreciation opportunities relative the general market.

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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