CI Outlook - Archives

Second Quarter 2005

July 6, 2005

 

Mr. and Mrs. Investor
123 Elm Street
Dallas, Texas 75205

Dear Investors,

As Yogi Berra would say “it ain’t over till it’s over”.  Well this year is one half over and we are happy to report that we are back on track.  As much as last quarter’s results disappointed us this period’s have delighted us. Your account appreciation exceeded market returns for the quarter and the year.  With market returns for the year still negative, the S&P 500 down 1.7%, and the Dow down 4.7%, positive results are difficult to obtain.  As you know from our previous letters this is not a surprise and has been the reason for our cautious approach to the market.  While we will probably always remain somewhat cautious with your money we think we are starting to see the beginnings of a more positive market environment. 

Looking forward to the second half our economic forecast is little changed from last December’s.  While high oil prices and higher interest rates are still a cause of concern, low expectations for the markets are beginning to give us hope.  In December we thought earnings forecasts for 2005 were too high and would be lowered.  In our opinion this process may be getting overdone.  As analysts continue to ratchet down earnings estimates and by extension expectations for the market, room for a positive surprise later this year is beginning to develop.  “Surprising” projections of profits at companies such as AMR and higher than expected growth at Texas Instruments are examples of this process.  They demonstrate that negative investment opinion can become too biased and that good company management can overcome the headline problems such as oil and interest rates.  Based on this type of contrarian’s logic we are continuing the search for well managed companies whose securities would make suitable additions to your portfolio.

We are looking forward to a better second half in 2005.  As always we want to thank you for your continuing patronage and welcome any questions or comments you may have.  Should you have a friend who might benefit from our services please feel free to give them our names.

 

            CJ Brott, Jr.                                        Karen Burns
 

 


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