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June 2005 Newsletter
Wednesday, June 01, 2005
CANADIAN ADVANTAGE FUND
As of May 31, 2005 the Van Arbor Canadian Advantage Fund concluded its first full year of operating results. Over the past 12 months the performance of the Fund was superior to its benchmark, the S&P TSX Index, having outperformed the Index by 18.67%. In market news, the Bank of Canada elected not to raise key interest rates in their meeting late May, signaling that inflationary pressures have not created enough of a drag on the economy to warrant curbing spending rates. As a result, the spread between Canadian and US overnight rates has come to 0.5% consequently pulling the Canadian dollar down to 79 cents from its high of 85 cents back in November. In commodity news, price of oil recovered from its month low of $46.84 and started trending upwards of $52 per barrel. As a result the market rewarded the oil and gas sector sending shares of companies like Talisman (TLM:TSX) and Suncor Energy (SU:TSX) up 9% and 7% over the month respectively. Retailers such as Reitman's (RET/NV:TSX) continue to display strong growth in the industry, partly due to the growing demand for products offered and the right business model. Reitman's recently reported a 51% growth in earnings per share sending the stock up 15% for the month. There were no portfolio trades this month.
US ADVANTAGE FUND
The Van Arbor US Advantage Fund also wrapped up its first full year of operations. Over the last 12 months, the Fund has outperformed the broad equity benchmark, S&P 500, by 5.83%. In economic news the U.S. markets climbed late in the month as investors welcomed the upward revision of Gross Domestic Product in first quarter to an annualized rate of 3.5%. Federal Reserve will likely hike interest rates by 25 basis points to ward off mounting inflation pressures when it meets June 30. Signs are also pointing to a moderation of the trend toward increasing inflation in the second half of 2005, which could influence policymakers to keep rates on hold as economic growth slows in the latter half of this year. One of the strongest and still most resilient industries in the market has been the home builders. As a component of the S&P Index, this group has shown a remarkable advancement over the last year and was up over 10% last month alone. The moderate exposure to this industry propelled the Fund's performance last month as stocks of companies like KB Home (KBH:NYSE) and Pulte Homes (PHM:NYSE), appreciated by 16% and 7% respectively. Outstanding performance was also recorded by Legg Mason (LM:NYSE), a US based investment firm that manages $373 billion. Fourth quarter earnings rose 28% at Legg Mason, resulting in a record net income figure as the company reported earnings gains in 13 consecutive quarters. There were no changes to portfolio holdings last 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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