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January 2006 Newsletter
Sunday, January 01, 2006
Dear Investor,
Van Arbor would like to wish you a happy, healthy and prosperous 2006. The past year has brought many successes for Van Arbor, with the Canadian Advantage Fund ranking number one in its category (Canadian Equity Pure). The US Advantage Fund also fared very well wrapping the year up in the first quartile in its category and the Euro Advantage Fund held back slightly in part by the strength of the Canadian dollar. Overall we are very pleased with our progress and performance and look forward to a long lasting and profitable relationship with you, our investors.
It has been a busy year in the investment world especially in Canada, where resource and financial stocks have carried the ball. Enthusiasm for the stronger Canadian dollar, which benefits domestic importers of foreign goods, is offset by seemingly unending increases in energy costs at home and the increasing challenges facing exporters. The US and European markets, although not matching Canada's performance, have shown considerable resilience through some uncertain times. It is a challenging time to be an investor with the ever-increasing number of alternatives available often confused by the diversity of opinions by the media and other pundits
Unlike many money managers who react to headlines and attempt to predict the future of the market we stick to our simple discipline. Our core belief, "Remove human emotion from the investing process and create wealth using a disciplined, proprietary investment strategy" has served us well. We will not stray from our discipline and use a crystal ball approach. As we continue to build an industry-leading track record, our edge is our commitment to our proven philosophy.
CANADIAN ADVANTAGE FUND
The Van Arbor Canadian Advantage Fund successfully concluded the calendar year with a 35.37% gain for 2005. The Canadian Fund was ranked by Globefund as the #1 fund out of 270 in its asset class of Canadian Pure Equity Funds for 2005. Over the past year the Fund was up ten out of the twelve months and exceeded the benchmark return eight times over the course of the year. As the energy related holdings helped pave the success of 2005, one must question the stamina of the energy bull cycle and look to other industries as a potential source of untapped returns and diversification. Positive and substantial gains over the year were also offered by non-energy holdings of financials, industrials and utilities, while 2005 was slowed by consumer staples and information technology. With a low interest rate environment in 2005, utilities and engineering related companies stood to benefit and had a positive impact on the overall growth of the Fund. For 2006 we feel confident in our approach and the outlook for the companies we hold in our portfolio. The S&P TSX Index was up 22% to end the year at 11,280 points which left the benchmark only a couple of hundred points shy of reaching a new high since August of 2000. There were no portfolio trades this past month.
US ADVANTAGE FUND
The Van Arbor US Advantage Fund successfully ended a challenging year up 5.58% to close at $12.18. This compares favorably to our benchmark for the year 2005; S&P500 up 3.10% and the Dow Jones Industrial down slightly at minus 0.28%. Of the 542 funds ranked by Globefund, the Van Arbor US Advantage Fund finished in the top quartile for the year. This proved to be a very tough year for the US market when one considers the clout over the ballooning government deficits, over a dozen rate hikes, skyrocketing energy prices and the flagging optimism of the average US consumer. However corporate profits weren't hurt all that much and a new wave of optimism resurfaced for 2006 which sent the market on a last quarter rally. Over the past year the Van Arbor portfolio took advantage of its energy holdings and has managed to create a slight hedge with this commodity exposure. On the non-energy front, healthcare and consumer stocks made healthy contributions to the overall portfolio growth. There were no changes to the portfolio during the month of December.
EURO ADVANTAGE FUND
The Van Arbor Euro Advantage Fund ended its short year down 2.65% since its inception in August 2005 and during the month of December the Fund was up 1.45%, compared with the S&P Euro index which was up 3.88% to close at 1,936 (CAD). Over the past five months the Fund has been mostly rewarded from three different sectors -energy related (which as a group were up an average of 10%), steel producers (which were up over 9%) and financials which were also up over 10%. Since its inception the highest returns have come from Finland, which has averaged over 12%, followed by Austria and Ireland which have produced returns in the magnitude of 11%. The geographical sectors of Spain, France and Germany have lagged the others mentioned and have returned 0.06%, 1.21% and 0.26% respectively. While the return from the portfolio of equities has been encouraging, over the past five months there has also been a devaluation of the Euro against the Canadian dollar of 7.3%. There have been no portfolio trades this past 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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