1st Quarter Update
The year has gotten off to a decent start with market averages slightly higher amid the usual assortment of international uncertainties, economic concerns, and gyrating energy prices. Client accounts for the most part are holding their own, slightly higher than market averages. We have held on to energy companies as well as materials, mining, and infrastructure stocks. The common denominator on all of these companies is a low price relative to earnings and other favorable valuation ratios. In other words, these stocks remain cheap, which gives us the confidence to ride through market turbulence. As long as the domestic US economy hangs in there, and the developing economies of China, India and others continue to grow, demand for the nitty gritty stuff that make economies go -- metals, energy, heavy infrastructure, water, transportation -- will drive the stocks of companies that produce these things higher over the mid and long term.

Financial companies have been another terrific investment for us. Brokers, investment companies, and banks have moved up sharply in the past year, all the while paying good dividends. Again the formula for success is to find companies selling cheaply with regard to earnings, revenues or asset value. In the case of financials, undue pessimism about interest rates pushed a lot of these companies down to depressed levels, especially considering the continued growth in the need for investment and banking services for an aging population and a growing world economy. We were willing to buy and hold, and wait for others to recognize the value contained in these businesses. We continue to like these same companies as long as they are well-managed and generate growing amounts of cash return for shareholders.

Healthcare, technology and certain special situations continue to round out client portfolios. Healthcare grows in its importance to the economy, providing a steady tailwind for individual companies that provide products and services to healthcare providers and consumers in an efficient and profitable manner. Technology moves fast, often too fast to find an appropriate long term investment. But we remain on the lookout for steady cash generators that have the technology and management skills to keep from slipping behind. Finally, special situations, that is companies that may be on the verge of a buyout, breakup, or other type of restructuring, are often fertile places to commit capital in an era of private investors and unhappy shareholders pushing for companies to undertake changes to unlock the value contained within.

We continue to adhere to the discipline of finding undervalued investments and holding on for higher prices. This sometimes requires avoiding the tempting investment flavor of the month. There is a place for that sometimes, but requires trading more than investing. It's like a game of musical chairs, you don't want to be caught holding a momentum driven stock when the speculative music stops. That is not our role at Arrival Capital. We seek investments that can be bought cheaply yet with the potential to appreciate meaningfully over time. We then arrange these different investments into a diverse portfolio for our clients. If anything, we are more collectors than traders for our clients. Observing, studying and then seizing the opportunity when it arises. We look forward to a good year ahead and thank you for your confidence.
- posted by Jay @ 10:52 AM