Arrival Capital -- Market Commentary
Friday, January 07, 2005
Investment Outlook -- 2005
It is a curious fact that investors often look to the start of a new year for whole new trends and concerns to emerge. The calendar is just an arbitrary cutoff, after all. There is no intrinsic reason for the themes and issues heretofore ascendant should suddenly fade from view. We take the approach, therefore, that rather than wholesale changes, the new year should cause reassessment and a replenishment of ideas, not an automatic sale of the old and embrace of the new.
In this spirit, our review of the investment landscape suggests the following strategies going forward:
(1) Continue to hold, if not add, to energy positions. The world economy continues to expand and supplies of energy are not expanding as rapidly. These oil and natural gas stocks (DVN, RD, ECA) may be a changeable as the weather at times, but valuations remain low, revenue growing, and their place as an inflation hedge in any portfolio therefore secure;
(2) Our long held and so far largely unrewarded media positions (CMCSA, VIAB) finally appear to be shaking off the issues of 2004, and the market finally realizing their cash generating prowess;
(3) Industrial and chemical stocks (SWK, PX, FO), with their good yields and solid growth, continue to be good holds here, as do certain materials companies (AWC, NEM);
(4) Well-managed financials (WFC) and REITs (NLY, AHR) must be watched carefully for signs of rising interest rates and reduced profitability;
(5) Healthcare remains largely a factor of newsflow and government actions, but we continue to search for healthcare companies that are poised to benefit from the aging of America and the search for better treatments and medicines (SFCC, JNJ).
All of these strategies are, of course, themselves subject to change and placed atop our overall strategy of searching for value wherever it can be found, including in contrarian purchases of out of favor companies and in undiscovered but profitable companies with a new product or service to sell.
Although we strive for consistency in our strategies, 2005 is, of course, a new year. Arrival Capital wishes all our clients and friends a healthy, happy and prosperous New Year. Thank you for your continued confidence.
