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Yes it's spring, and the weather is finally warming up. On a good note, the market has seemed to level off.
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Good Changes in Portfolios
Welcome Back Equities & High Yield! |
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Those of you who have assets under my custody started to see the shift in mid-February away from international mutual funds and back to domestic holdings. Positive trends started showing with the introduction of High-Yield mutual funds into your accounts, which was a welcome change over the cash that had been sitting in money markets. High-yields historically pay out dividends monthly and can offer share price appreciation.
I also moved back into the natural resources/energy sector for those of you that did not have any exposure to this sector. This sector was beaten down last year, and I felt this was the time to return back to a category that was an essential sector to any portfolio.
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In the News:
Time Warner and Citadel Broadcasting |
 Time Warner, Inc. announced a reverse split in their stock in February. Although this does not affect many clients, it should be noted. This is a one for three reverse split, effective March 30, 2009. Their symbol will remain TWX
 Citadel Broadcasting is being de-listed. Again this security affects only a few clients, but this security is/has become de-listed. Citadel was a spin off that was granted to shareholders and unfortunately never performed to expectations. |
| The economic news is still not good - and the markets are down for the most part |
You all listen to the news. The foreclosures are still continuing, the jobless claims are up. The next wave of bankruptcies are occurring. Who among us has not had a friend or family member not lose a job or had their hours reduced at work? The recession topic is on everyone's lips. Still, we have a lot to be thankful for. Most of the portfolio looked good this quarter. Hopefully, the downward spiral has finally ended. Most of you have come in for your year-end reviews and we discussed our various 2009 strategies. The first quarter ended with the S&P down for the year. As for the markets ending April 3, here is where the indexes stand: 
As many of you have seen in your portfolios, I have opted into the new issue short-term government agency notes. These notes are AAA-rated and offer returns of 4.25% - 6.5%.
Also, I have returned to equity trading. Last month's home run was Textron that was purchased at $5.75. This only went into larger portfolios, or clients that expressed an interest in equities. My target sell price is $15.00.
As for how the portfolios fared, I am happy to say we beat the market, not resoundingly, but in a better light. The moderately aggressive portfolio, after fees, squeaked in at .01% (a positive is a positive, especially after last year). The conservative portfolios came in at -3.2%, still ahead of the S&P. I believe they did not perform as well as the other portfolios, because they did not have the small exposure to the NASDAQ that the other portfolios would have benefited from.
Also, please be advised that no two portfolios are identical and that no two clients have the same risk tolerance or time horizon. These numbers are for your reference, so that you can benchmark your portfolio against the various indices and my general performance.
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Both Petrobras Energia and Petro Canada will each experience mergers
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 Petrobras Energia is one of my International plays that will stay in the mix, even though I have cut back on my foreign exposure. They have recently received an infusion of cash from China Development Bank. They put together a $10 billion financing package for Brazil's Petrobras to help fund a five-year investment plan. Their merger plans have not been finalized, but I will keep you updated.
 Petro Canada has proposed a merger with Suncor, another Canadian company, which has been well-received by both sides. The merger will offer competitiveness, cost-efficiency and allow them to focus in on areas of renewable energy. Completion of the proposed merger should take place the third quarter of 2009.
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Mechel OAO has been hit with a class action law suit
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 The law firm of Izard Nobel, LLP is representing investors in prosecuting claims of securities fraud, announcing that a lawsuit seeking class action status has been filed in the US on behalf of those who purchased the security Mechel OAO ADS (MTL), between October 3 2007 - July 25, 2008 (inclusive). The complaint charges that certain officers and directors engaged in monopolistic conduct, and financials were not prepared in accordance with Generally Accepted Accounting Principals (GAAP), resulting in the stocks decline. To find out more about the class action lawsuit visit www.izardnobel.com. I will continue to hold on to this security, as the price has stabilized and I am awaiting further company developments.
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| Securities and Exchange Commission (SEC) to Raise Exchange Fees |
In reviewing recent statements you may have noticed a change in transaction fees for equity charges. Effective April 1, 2009, the SEC announced it was raising the transaction fees it charges for exchanges. The current level it charges is $5.60 per $1 million for securities either bought or sold, will be increasing to $25.70 per $1 million per sales transactions, pro rated. Please do not confuse this cost with trade costs, which are reflected back to your accounts at the end of each quarter.
If you have any questions do not hesitate to call my office.
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Your Planner - Out and About
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In January I attended a portfolio managers conference in Florida where I had the opportunity to listen to economists give their view on where they felt the future direction of our economy was headed as well as where the stock market was bound. There seemed to be general consensus that we had hit the bottom and that they were opportunities in specific sectors as we moved through 2009.
The general outlook was to anticipate a growth rate of 5 - 6% in a moderately aggressive portfolio for the back half of the year. With certain cyclicals leading the way. They were also cautious on the International Sectors, as they felt they had not completed their market cycle pull back.
I also had the opportunity to attend a Fidelity economic presentation in March and their economist resonated many of the same thoughts and comments I had heard earlier this year. Please call me to discuss in detail what sectors and plays may best suit your individual portfolio.
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Sincerely,
Angela Thomson, CFP (r)
Coastal Financial Planning, Inc. |
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Our Question of the Quarter is... |
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What was the 4th quarter P/E (price to earnings) ratio?
a) 13.0
b) 17.2
c) 24.9
d) 23.7
The volatility in the equities market has been dramatic in 2008. The long-term average, which tracks back to 1930, has been 17.2. If you focus on that ratio for last 20 years the P/E has averaged 24.9. The last quarter of 2008, we were looking at a P/E ratio of 13.0. So if you answered A, you were correct.
What does this mean to the investor? To get a clear picture you can look back to the returns that were seen post depression: In May of 1932, the 5-year cumulative average return was 367%.
In July 1982, following the worst recession in 25 years the 5-year cumulative return was 267%. In December of 1994, subsequent to the Fed tightening, the following 5-years resulted in cumulative returns of 251%.
The choice is yours: do you want to continue to stay out of the market or is it time to get back in? My money is going back in. I would agree that not all investments will return in value, and all we need to do is look to the dot.com era to remind ourselves of that. For the most part, the solid, grounded companies will find their way back and so will your investment dollars.
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