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August 2007 Newsletter
Wednesday, August 01, 2007
CANADIAN ADVANTAGE FUND
The Van Arbor Canadian Advantage Fund ended the month down marginally by 0.6%, while the S&P TSX Index ended up 0.05%. The Canadian equity market had a mixed month in July as gains early in the month were tempered by a global pullback in equity markets in the last week of trading. Concerns that US sub-prime loan problems was spreading to other credit markets led to a general reassessment of risk in equity and bond markets. The Canadian economic landscape remains the same with GDP growth and retail sales confirming the pace of moderate economic growth. Several companies reported earnings last month which predominantly met or beat expectations. Shares of Saputo Inc (SAP:TSX) rose 16% last month as the food manufacturer had another good earnings quarter building on its cost cutting plans and improving margins.
Fund Performance Summary (Benchmark is S&P TSX Index)
US ADVANTAGE FUND
The Van Arbor US Advantage Fund fell 6.07% for the month, while the S&P 500 index ended down 3.2%. US sub-prime loan and mortgage lending were the dominant theme last month as investors worried that credit weakness was spreading to other credit markets. Expectations that rising borrowing costs will affect corporate debt as well as merger and acquisition activity led Wall Street to post its largest pullback in five years. The financial sector was especially affected as investors were uncertain about how much banks will be affected by credit weakness. Most of our positions in the financial sector saw their shares fall sharply as uncertainty rather than information pushed shares lower. Given the well diversified banking operations of our large cap blue chip holdings we view increased value in these holdings after the recent pullback. Quarterly earnings season was generally positive with earnings growth coming in better than expected from our holdings in PepsiCo (PEP:NYSE) and Johnson & Johnson (JNJ:NYSE).
Fund Performance Summary (Benchmark is S&P 500 Index)
EURO ADVANTAGE FUND
The Van Arbor Euro Advantage Fund ended the month down 1.88%, while the S&P Euro Index fell 2.4%. European markets were not immune from US credit worries as there were concerns with credit weakness spreading to Europe. Positive earnings and economic news helped markets rebound on the last days of trading as domestic demand and a strong job market reduced worries of a US slowdown. Financial and industrial sectors were weak last month while the consumer sector ended flat. Economic growth continued its strong pace with GDP growth again outperforming American growth. The Euro currency began to stabilize versus the Canadian dollar this month after rising just over 5% in three months as traders absorbed interest rate changes on both sides of the Atlantic. This month saw shares of Metro AG sold while a position was established in the German industrial Man AG.
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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