CI Outlook - Archives

March 2012

It’s as if they have cleaned out the “Greece trap”.  After a great January the market remained strong throughout the month February.  And the leadership has come from an area that has provided little excitement since 1999.  That area is old line technology companies.  Led by the excitement generated by Apple Computer many old line dividend paying stocks such as Microsoft and Intel have become market leaders.  After more than a decade of building their business while their stocks were being ignored these names are being rediscovered for the high quality growth companies they are.  That was our hope when we bought them last year.  And it is the reason we added ETF’s representing technology exposure to your portfolio this year.

Two of those ETF’s are the Powershares QQQ Trust and the SPDR Technology Fund.  QQQ is the NASDAQ’s largest 100 companies.  They include not just Microsoft, Intel, Cisco etc. also today’s hottest old line tech Apple.  Furthermore the SPDR Technology ETF’s top holding is Apple, which makes up 15% of the fund’s total holdings.  Obviously we have made a significant commitment to the reemerging large cap tech sector.

We bought these securities for you, before the recent run up, for several reasons.  One important reason was income.  When we bought them the current dividend yields were well in excess of ten year Treasury yields.  Yet in our opinion, with their strong balance sheets and growing earnings the financial risk in these large companies was limited.  Even more exciting to us is the fact that most of these companies stocks have not moved up in the last decade.  Therefore we were able to buy the growth of earnings and dividends at ten year lows.  From a technical perspective the longer a stock goes sideways the further up it will go in price once the move starts.  Ten years is a long time.  Thus we think large cap technology may remain the market leading sector for quite some time.

As exciting as it is to see old line companies move up, it is even more so to contemplate the prospects for the overall market.  As you know we believe the long term trend of prices has turned higher.  In the short term prices have moved up so rapidly that we may stall out or even see a modest drop in prices from today’s current levels.  However the majority of large investors are still heavily under invested, and hoping for a pullback to buy on.  Experience has taught us that the market rarely satisfies the majority of investors.  Therefore unless the market spikes up on heavy volume, any pullback should be shallow.  With that thinking in mind we are monitoring your portfolio to weed out weak holdings and using the cash generated to add promising new securities as they become available.

Please call us with any questions or concerns you may have about your investments.  Thank you for your business.

 

CJ Brott               Karen Burns


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