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June 2007 Newsletter
Friday, June 01, 2007
Last month marked Van Arbor Asset Management's three year anniversary. Our inception funds, the Canadian Advantage Fund and US Advantage fund, have been a great success along with our almost two year old European Advantage Fund. Our Canadian Fund has nearly doubled (99.9%) in value in just three short years. The fund's three year annualized return of 25.97% impressively outperformed the market's annualized return by almost 6%.We are proud to say that Van Arbor's Canadian Advantage Fund is one of the top ranked funds in its class in all of Canada.
CANADIAN ADVANTAGE FUND
The Van Arbor Canadian Advantage Fund had another outstanding performance this month, advancing 5.17% to close at $19.80. The Canadian equity market showed more strength this month with mergers & acquisitions, higher commodity prices and greater demand for energy exports helping push the S&P TSX past 14,000 for the first time. Canada's GDP growth grew more than expected last quarter, rising 3.7% year over year on the strength of export demand particularly from oil and natural gas. The job market remains strong, which has prompted the Bank of Canada to increase its forecast for economic growth this year. Rising prices remain a concern as inflation remains above the Bank's target range. This has increased chances of an interest rate hike sometime this year. Our portfolio did very well this earnings season, with First Service Group (FSV:TSX) earnings up 36% and Home Capital Group (HCG:TSX) earnings up 47%. Shares of Petro-Canada (PCA:TSX) as well as CCL Industries (CCL/B:TSX) both saw returns of 9.4% and 11.6%, respectively. This month saw shares of Laperriere & Verreault Group (GLV/A: TSX) sold while a position was made in Alimentation Couch Tarde Inc (ATD/B:TSX).
Fund Performance Summary (Benchmark is S&P TSX Index)
US ADVANTAGE FUND
The Van Arbor US Advantage Fund rose 1.72% for the month to close at $13.41. The US equity market saw another positive performance this month with major market indices reaching new record highs. Mergers and acquisitions, statements by the Federal Reserve Bank and housing data were the main focus of markets last month. GDP levels reached their lowest growth rate in four years as the weakness in the housing market remained a drag on economic growth. The growing trade deficit and reduced inventories also contributed to the sluggish first quarter growth. The bright side was an increase in consumer spending as the job market remained strong with jobless claims falling last month. Stronger growth in domestic demand, less concern about inflation and more competitive exports have all led to economic growth forecast's improving for the rest of 2007. Target (TGT:NYSE) and Disney (DIS:NYSE) reported positive earnings this month with profit up 18% and 27% respectively.
Fund Performance Summary (Benchmark is S&P 500 Index)
EURO ADVANTAGE FUND
The Van Arbor Euro Advantage Fund ended the month marginally down 0.59% to close at $12.18. The fund's relative performance in Euros' was positive, outperforming the benchmark S&P Euro Index by almost 1.5%. The fund's negative performance was due to the strength of the Canadian dollar last month, which resulted in the Euro depreciating 5.3% versus the Canadian dollar. Expectations of rising interest rates in Canada, strong economic growth and merger & acquisitions of Canadian companies pushed the Canadian dollar up against all major currencies last month. The Euro Zone continues to show economic strength with business and consumer confidence at a 6 year high. Unemployment remains low, especially in Germany and France, where they are at a six year lows. The strength of domestic demand and greater export demand from outside the US has helped the Euro Zone build on last year's economic expansion. Finish construction equipment provider Ramirent Oyj reported earnings this month with profits rising 27% due to the strength of Scandinavian construction demand. Germany's second largest utility, RWE AG, reported a 50% increase in profits as the company earned more trading power in markets including the UK. This month saw shares of Krones AG sold while a position was established in French utility Schneider Electric SA.
Fund Performance Summary (Benchmark is S&P Euro Index)
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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