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January 2005 Newsletter
Saturday, January 01, 2005
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
- Warren Buffett
CANADIAN PORTFOLIO HIGHLIGHTS
NET ASSET VALUE $ 12.13
The Van Arbor Canadian Advantage Fund concluded the 2004 year with another strong month adding 5.21% to the overall 21.3% return since inception. The Canadian equity markets, as represented by the broad S&P TSX Composite index were up 2.84% for the month, in part due to a positive response to the Bank of Canada's decision to hold the overnight lending rate steady at 2.5%. Markets were also positively affected by the recently published Canadian retail sales numbers which jumped 1.4% in October to a record C$29.6 billion, topping analysts' expectations of a 1.0% rise. Not surprisingly, the biggest contributors to the Fund's overall performance for the month were retailers averaging a 7.75% return. Reitman's Canada (RET/NV/ACN:TSX), for the second straight month, continued to display a strong run towards the year's end appreciating 14.4%. The Fund's second biggest advancers for the month were utilities and transportation related companies which as a group contributed a 6% return to the overall performance. Most influential players in this group were Finning International Inc (FTT:TSX), a local Vancouver based dealer of Caterpillar equipment and CHC Helicopter Corp (FLY/SV/ACN:TSX). The two were up 6.03% and 6.31% respectively. Financials and insurance dealers held their ground over the period appreciating 5.96%, mostly due to the spectacular performance of a single bank. After announcing record annual earnings and revenues for fiscal and forth quarter 2004, Canadian Western Bank (CWB:TSX) announced a 20% increase in quarterly dividend and a two-for-one stock split. Shares of Canadian Western appreciated 13.11% for the month. Early in the month Canadian Imperial Bank of Commerce was sold to purchase Mullen Transportation Inc. (MTL:TSX), an Alberta based oil field services and trucking company.
US PORTFOLIO HIGHLIGHTS
NET ASSET VALUE $ 11.54
The Van Arbor US Advantage Fund was up 6.46% for the month of December and concluded the year with a 15.4% return since inception. Brisk spending by consumers and businesses in the US helped the economy expand nicely in the third quarter. The slight upward revision to GDP growth in the third quarter of 4.0% mostly reflected the fact that the trade deficit was less of a drag on the economy than previously estimated. As a result the equity markets climbed steadily over the month with solid economic data and positive profit forecasts for 2005 assuring investors of further returns. The Dow Jones Industrial Average (DJIA) was up 2.76% for the month reaching a new 3 1/2 year high, while the S&P 500 Index gained 2.91% for the month. Health care and medical equipment related companies continued to provide strong growth for the Fund and this month contributed a 6.05% return. Leading the group were CR Bard Inc (BCR:NYSE), a manufacturer and distributor of surgical and diagnostic devices and Stryker Corp (SYK:NYSE), a developer and manufacturer of specialty surgical and medical products. The shares of two companies were up 9.01% and 6.76% respectively for the month. Financials performed well for the month contributing a 3.48% gain to the overall performance of the Fund. Citigroup Inc (C:NYSE) led the group as its common stock appreciated 5.67% over the period. Manufacturers led by Pulte Homes Inc (PHM:NYSE) contributed 3.75% to the Fund as Pulte delivered a strong 13.35% return. Weaker than expected growth in earnings, coupled with a deteriorating future outlook signaled a sale of Medtronic Inc (MDT:NYSE) earlier this month. Proceeds were used to buy shares of Exxon Mobil Corp (XOM:NYSE), a worldwide operator of petrochemicals and petroleum. Additionally, Larry O'Brien will resign as a Director of Van Arbor effective as of January 28, 2005. Mr. O'Brien is no longer CEO and Chairman. Director and Founder Steve Hanson has been named the new Chairman. We would also like to welcome John Bear, formerly of CI Funds and Portus Asset Management, to our team as VP Sales and Marketing.
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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